1. When using the indirect method to determine operating cash flows, how is the amortization of...

1. When using the indirect method to determine operating cash flows, how is the amortization of bond discount shown on the Statement of Cash Flows?

A.   Operating activity as an addback item
B.   Operating activity as a subtract from item
C.   Investing activity
D.   Financing activity
E.   Not reported on statement of cash flows

2. When using the indirect method to determine operating cash flows, how is the equity method investment revenue in excess of dividends received shown on the Statement of Cash Flows?

A.   Operating activity as an addback item
B.   Operating activity as a subtract from item
C.   Investing activity
D.   Financing activity
E.   Not reported on statement of cash flows

3. When using the indirect method to determine operating cash flows, how is the purchase of building for cash received shown on the Statement of Cash Flows?

A.   Operating activity as an addback item
B.   Operating activity as a subtract from item
C.   Investing activity
D.   Financing activity
E.   Not reported on statement of cash flows

4. When using the direct method to determine operating cash flows, how is the acquisition of equipment by issuance of note payable shown on the Statement of Cash Flows?

Operating activity
Investing activity
Financing activity
Noncash investing and financing activity
Not reported on statement of cash flows

5. When using the direct method to determine operating cash flows, how is the sale of treasury stock shown on the Statement of Cash Flows?

Operating activity
Investing activity
Financing activity
Noncash investing and financing activity
Not reported on statement of cash flows

6. When using the direct method to determine operating cash flows, how is the purchase of available-for-sale securities for cash shown on the Statement of Cash Flows?

Operating activity
Investing activity
Financing activity
Noncash investing and financing activity
Not reported on statement of cash flows

Solutions

Expert Solution

Solution (1)	Correct Answer is (D) financing activities
	As a result of the amortization of the bond entity will have the outflow of cash which bond might have received in previous periods as borrowings.

Solution (2)	Correct Answer is ( C) Investing Activities
	Since revenue has bee received on investment in equity, not from ordinary operations, investment revenue in excess of dividend received shall be accounted as investment activities.

Solution (3)	Correct Answer is ( C) Investing Activities
	Since the purchase of building is an investment in fixed assets, it shall be accounted for as investment activities.

Solution (4)	Correct Answer is (D) Non-cash investing and financing activities
	Since no payment in cash or bank made by the company for the acquisition of equipment, instead, note payable has been issued which is a type of finance. Therefore, it is a non-cash investing activity as well as financing activity.

Solution (5)	Correct Answer is ( C) Financing activities
	Sale of treasury stock is own share repurchase for the purpose of selling such stock on later date is a type of financing activity

Solution (6)	Correct Answer is (B) Investing activities
	Since available for sale security are purchased for earning the short term profit out of salling such secutiry in shorter period of time, it is an investing activites.

ekkarill92 answered 1 year ago

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