Question

1. The direct method of producing a statement of cash flows differs from the indirect method in that the direct method

1. begins directly with net income in the financing section
2. does not depend on starting the operating section with net income.
3. begins directly with net income in the investing section
4. begins directly with net income in the operating section

2. In using the indirect method, the operating section will show depreciation expense for the period as an amount that must be

1. added to net income.
2. deducted from net income
3. ignored
4. none of these answers are correct.

3. An older building is sold by a company for a price that created a gain upon getting rid of this asset. The proper recognition of this event in the statement of cash flows for a company using the indirect method is

1. record in the operating and investing sections
2. record in the investment section only
3. record in the financing section only
4. record in the operating section only

4. If, during the year, a company using the indirect method has experienced both gains and losses on the sale of older assets, the proper treatment of these gains and losses in the operating section is to

1. none of these treatments are correct
2. subtract the losses from the gains and add the difference to net income.
3. add in the gains and subtract the losses
4. add in the losses and subtract the gains

Answer 1

Answer-1)- The direct method of producing a statement of cash flows differs from the indirect method in that the direct method= does not depend on starting the operating section with net income.

2)- In using the indirect method, the operating section will show depreciation expense for the period as an amount that must be= added to net income.

3)- An older building is sold by a company for a price that created a gain upon getting rid of this asset. The proper recognition of this event in the statement of cash flows for a company using the indirect method is = record in the operating and investing sections.

4)- If, during the year, a company using the indirect method has experienced both gains and losses on the sale of older assets, the proper treatment of these gains and losses in the operating section is to= add in the losses and subtract the gains.