Question

Regarding the use of a spreadsheet for the preparation of the statement of cash flows, which of the following statements is incorrect? O A. The spreadsheet cannot be used for the direct method. OB. When companies face complex situations, a spreadsheet can help in preparing the statement of cash flows. OC. Accountants can prepare the statement of cash flows directly from the lower part of the spreadsheet OD. The spreadsheet starts with the beginning balance sheet and concludes with the ending balance sheet.

Answer 1

The correct option is "The Speadsheet cannot be used for the direct method".

Supporting explanations:

The speadsheet used to prepare the cash flows can be used for both direct method and indirect method. Speadsheet of cash flows statements is prepared by the sub components like cash received from customers, cash paid to suppliers for inventory, cash paid to employees, cash paid for interest and taxes separately under Operating activities and the same treatment will be made for cash flows from Investing and Financing activities.

Therefore, speadsheet of cash flows can also be used for direct method, thus, this statement is incorrectly given in the options whereas all remaining options are correct.

Hence, the correct option is A. The Speadsheet cannot be used for the direct method.

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The correct answer is " B. Net cash used for Financing Activities is -$42,000."

Supporting calculations:

Perez Biofuels Company
Cash Flow Statement (Partial)
Cash flow from Financing Activities:
Repayment on Long-term Notes Payable	($61,000)
New borrowing on Long-term Notes Payable	$19,000
Net cash used for Financing Activities	($42,000)

Therefore, the correct answer is B.

Note: All borrowings and repayments on long-term notes payable are part of Financing Activities but not investing activities.