Which of the following is classified as an investing activity on the statement of cash flows?
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1.According to the accounting profession, which of the following would be considered a cash-flow item from an "investing" activity?cash inflow from interest income. cash inflow from dividend income. cash outflow to acquire fixed assets. all of the above. 2.According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from a "financing" activity?cash outflow to the government for taxes. cash outflow to shareholders as dividends. cash outflow to lenders as interest. cash outflow to purchase bonds issued by another company. 3.If the following are balance sheet changes: $5,005 decrease in accounts receivable $7,000 decrease in cash $12,012 decrease in notes payable $10,001 increase in accounts payable a "use" of funds would be the:$7,000 decrease in cash. $5,005 decrease in accounts receivable. $10,001 increase in accounts payable. $12,012 decrease in notes payable. 4.On an accounting statement of cash flows an "increase(decrease) in cash and cash equivalents" appears asa cash flow from operating activities. a cash flow from investing activities. a cash flow from financing activities. none of the above. 5.Uses of funds include a (an):decrease in cash. increase in any liability. increase in fixed assets. tax refund. 6.Which of the following would be included in a cash budget?depreciation charges. dividends. goodwill. patent amortization. 7.An examination of the sources and uses of funds statement is part of:a forecasting technique. a funds flow analysis. a ratio analysis. calculations for preparing the balance sheet. 8.Which of the following is NOT a cash outflow for the firm?depreciation. dividends. interest payments. taxes. 9.Which of the following would be considered a use of funds?a decrease in accounts receivable. a decrease in cash. an increase in account payable. an increase in cash. 10.The cash flow statement in the United States is most likely to appear usinga "supplementary method." a "direct method." an "indirect method." a "flow of funds method." 11.For a profitable firm, total sources of funds will always total uses of funds.be equal to be greater than be less than have no consistent relationship to Retake Quiz Multiple-Choice Quiz questions are Copyright © by Pearson Education Limited. Used by permission. All rights reserved. Previous Quiz | Back to Main Index | Next QuizFavorited Content Publication date: 29 Nov 2020 us Financial statement presentation guide 6.7 ASC 230 identifies three classes of cash flows—investing, financing, and operating—and requires a reporting entity to classify each discrete cash receipt and cash payment (or identifiable sources or uses therein) in one of these three classes. The classification is based on the nature of the cash flow, without regard to whether a cash flow stems from another item (hereafter referred to as the Nature Principle). A cash flow is first evaluated to determine if it meets either the definition of an investing or financing cash flow. If a cash flow does not meet the definition of an investing activity or a financing activity, the cash flow is classified as an operating activity. Cash flows from operating activities are generally the cash effects of events that enter into the determination of net income (see FSP 6.7.3 for a discussion of events that enter into the determination of net income that are not classified as operating cash flows). The definitions of the activity classes within ASC 230, combined with its waterfall model, results in a bias toward classifying cash flows as operating activities. When determining the appropriate classification, the FASB acknowledged that, in some situations, a reasonable case can be made for alternative classifications. As a result, we believe that a change in classification of a cash flow item represents a reclassification of information and not a change in accounting principle, if both the old and new classifications are acceptable under US GAAP. In such circumstances, all years presented must reflect the reclassification, and the reclassification should be disclosed in the footnotes. 6.7.1 Investing activitiesInvesting activities include making and collecting loans, purchasing and selling debt or equity instruments of other reporting entities, and acquiring and disposing of property, plant, and equipment and other productive assets used in the production of goods or services. As discussed in ASC 230-10-45-12, the following items should be classified as investing activities:
6.7.2 Financing activitiesFinancing activities include borrowing money and repaying or settling the obligation, and obtaining equity from owners and providing owners with a return on, or return of, their investment.
6.7.3 Operating activitiesCash flows that are not investing or financing activities are operating cash flows. Typically, operating cash flows are receipts and payments that enter into the determination of net income.
ASC 230 defines operating activities. Excerpt from ASC 230-10-20 Cash flows from operating are generallythe cash effects of transactions and other events that enter into the determination of net income. Figure FSP 6-2 includes common transactions that enter into the determination of net income, but are not classified as operating cash flows. Figure FSP 6-2
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Which of the following activities would be classified as an investing activity?Investing activities involve the purchase and sale of long-term fixed assets, long-term investments, accepting notes receivable, lending loans, and few other investments other than in cash and cash equivalents.
Which of the following is classified as an operating activity in the statement of cash flows?Cash dividends paid to stockholders are an operating activity on the statement of cash flows.
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