M9

1When using the direct method to determine the net cash flows from operating activities, major categories would include:

		Cash received from bank.
		Cash paid for salaries.
		Cash paid for dividends.
		Cash paid for equipment.

2Cost of merchandise sold for the year was $850,000. Inventories were $60,000 and $120,000 at the beginning and end of the year, respectively. There were no changes in accounts payable from the beginning to the end of the year. Cash payment for merchandise to be reported on the cash flow statement using the direct method is:

		$850,000.
		$910,000.
		$940,000.
		$880,000.

3Generally Accepted Accounting Principles prefer which method of computing cash flow from operating activities?

		Combination method
		Direct method
		Indirect method
		Adjusting method

4The accuracy of the statement of cash flows, regardless of method used, can be verified by computing the change in the balance of:

		cash.
		equity.
		revenue.
		liabilities.

5The method of reporting cash flows from operating activities under which revenues and expenses on the income statement are adjusted to reflect the amount of cash received or expended for each item is the:

		direct method.
		indirect method.
		combination method.
		adjustment method.