Encircle the letter that corresponds to your answer. 1. Statement 1: A statement of cash flows when used alone provides information that enables the users to evaluate the changes in the net assets of an entity, its financial structure, and its ability to affect the amounts and timing of cash flows. Statement 2: Cash flow information is useful in assessing the ability of the entity to generate cash and cash equivalents. a. Only the first statement is correct. b. Only the second statement is correct. c. _ Both statements are correct. d. Neither of the statements is correct. 2. Which of the following statements is correct? I. Cash flow information enables the users to develop a model to assess and compare the past and present cash flows of different entities. II. Cash flow information is often used as an indicator of the amount, timing, and certainty of past cash flows. a. I only C. Both I and II b. II only d. Neither I nor II 3. Statement 1: Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to significant risk of changes in value. Statement 2: Cash flow information enhances the comparability of the reporting of operating performance by different entities because it eliminates the effects of using different accounting treatments for the same transactions and events. a. Only the first statement is correct. b. Only the second statement is correct. c. , Both statements are correct. d. Neither of the statements is correct.4. : Statement 1: Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. Statement 2: Operating activities are the principal revenue- producing activities of the entity involving acquisition and disposal of long-term assets. a. Only the first statement is correct. b. Only the second statement is correct. c. Both statements are correct. d. Neither of the statements is correct. 5. The following statements are correct, except: a. The entity shall prepare the statement of cash flows and shall present it as an integral part of its financial statement for each period for which financial statements are presented. b. Cash comprises cash on hand and demand deposit. c. Cash equivalents are held for the purpose of meeting the investment purposes of the business. d. Bank borrowings are generally considered to be financing activities. 6. Which of the following statements is correct? I. The entity presents its cash flows from operating, investing, and financing activities in a manner which is most appropriate to its business. II. Cash flows from operating activities are primarily derived from the result in changes in the size and composition of the contributed equity and borrowings of the entity. a. I only C. Both I and II b. II only d. Neither I nor II 7. Which of the following statements is correct? I. Cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities are cash flows from operating activities.II. Cash receipts and payments of an insurance entity for premiums and claims, annuities, and other policy benefits are cash flows from operating activities. a. I only C. Both I and II b. II only d. 'Neither I nor II 8. The following statements are correct, except: a. Only expenditures that result in a recognized asset in the .statement of financial position are eligible for classification as investing activities. b. Cash payments and receipts from contracts held for dealing or trading purposes are cash flows from investing activities. C. Cash receipts from sales of property, plant, and equipment are cash flows from investing activities. d. Cash receipts from the repayment of advances and loans made to other parties other than advances and loans of a financial institution are cash flows from investing activities. 9. Which of the following statements is correct? I. Cash payments by a lessee for the reduction of the outstanding liability relating to an operating lease are cash flows from financing activities. II. Cash proceeds from issuing debentures, loans, notes, bonds, mortgages, and other short-term or long-term borrowings are cash flows from financing activities. a. I only c. Both I and II b. II only d. Neither I nor II 10. Which of the following statements is correct? I. The direct method of reporting cash flows from operating activities adjusts the effects of transactions of a non-cash nature II. The indirect method of reporting cash flows from operating activities discloses the major classes of gross cash receipts and gross cash payments. a. I only C. Both I and II b. II only d. Neither I nor