1. If the direct method is used to prepare a statement of cash flows, credit sales may not automatically create a cash inflow because?

A) some receivables may be uncollectible. B) sales from a prior period may be collected in the current period. C) sales from the current period may be collected in a future period. D) All of these choices.

2. When a statement of cash flows is prepared using the direct method,

Question 2 options:

A)	net income is the starting point in determining cash flows from operations.

B)	cash paid for dividends is not included.

C)	the increase in cash is different than when the indirect method is used.

D)	the amount of cash collected from customers is calculated.

3. Assume the direct method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Decrease in Inventory-indicate the effect on cash payments for purchases by choosing one of the following:

Question 3 options:

A)	Add to Cost of Goods Sold to compute cash payments for purchases.

B)	Subtract from Cost of Goods Sold to compute cash payments for purchases.

C)	Not used to adjust Cost of Goods Sold to compute cash payments for purchases.

4. Assume the direct method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Prepaid Expenses-indicate the effect on cash payments for operating expenses by choosing one of the following:

Question 4 options:

A)	Add to operating expenses to arrive at cash payments for operating expenses.

B)	Subtract from operating expenses to arrive at cash payments for operating expenses.

C)	Not used to adjust operating expenses to arrive ay cash payments for operating expenses.