5.2 TRUE OR FALSE: Write the letter T if the statement is TRUE then F if the statement is FALSE 1. The net cash flow from operations must be reported using the direct method. EXPLORE 2. The direct method is generally favored by analysts and other users of cash flow statements. 3. Noncash items, such as depreciation expense, must be added to net income to arrive at net cash provided by (used in) operating activities when the indirect method is used, 4. If the direct method is used in preparing a statement of cash flows, a schedule must be provided that reconciles net income and net cash flow from operations. 5. When using the indirect method, losses are subtracted from net income in computing cash flow from operations. 6 . The indirect method of reporting net cash flow from operations shows the operating cash receipts and cash payments. 7 Cash receipts from interest revenue are reported as an operating activity. 8. Cash payments to lenders for interest expense are considered a financing activity. 9. Cash payments to repay principal amounts borrowed are a financing activity. 10. Net cash provided by (used in) operating, financing, and investing activities are combined to derive the amount of cash and cash equivalents at the end of the year. 75