Question

5) If a company borrows money from a bank, the interest paid on this load should be reported on the statement of cash flows:

A. Operating activity

B. Investing activity

C. Financing activity

D. Noncash investing and financing activity

E. This is not reported in the statement of cash flows.

6) The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

A. Operating activities

B. Financing activities

C. Investing activities

D. Schedule of noncash investing or financing activity

E. Reconciliation of cash balance

7) All of the following statements related to reporting cash flows from investing and financing activities are true except:

A. Reporting of financing activities is the same under the direct method and indirect method

B. Changes in noncurrent liability accounts are analyzed to determine cash flows from financing activities.

C. Changes in noncurrent asset accounts, current notes receivable, and current investments are analyzed to determine cash flows from investing activities.

D. The direct method applies accrual accounting while the indirect method applies cash basis accounting

E. Reporting of investing activities is the same under the direct method and indirect method.

Answer 1

question 5. A. This option is correct. Because, operating activity is the classification of cash flows in a cash flow statement. The factors classified under this category are the initial earnings activity of a component, so cash flow generally appears to be related to revenue and expenditure.

B. This option is incorrect. Cash flow from an investment methodology is a component of cash flow that explains how much cash was earned or how much was spent from different activities related to the investment in a given period of time. Investing activities include buying physical assets, investing in securities or selling assets.

C. This option is incorrect. In Financing Activities (CFF), cash flow appears to be a component of the company's cash flow statement, which refers to the net flow of cash used by the company as funds.

D. This option is incorrect. There are investing and financing activities that cannot directly affect cash. Such activities involve only long-term assets, long-term liabilities. In the case of non-cash investments and financing, the issuance of common stock or the purchase of equipment with payable notes to repay long-term loans.