payments for cash dividends d. receipts from the issuance of capital stock ANS: B DIF: 2
OBJ: 01 18. The statement of cash flows may be used by management to a. assess the
liquidity of the business b. assess the major policy decisions involving investments and
financing c. determine dividend policy d. do all of the above ANS: D DIF: 1 OBJ: 01 19.
Depreciation on factory equipment would be reported in the statement of cash flows
prepared by the indirect method in a. the cash flows from financing activities section b. the
cash flows from investing activities section c. a separate schedule d. the cash flows from
operating activities section ANS: D DIF: 2 OBJ: 02 20. Which of the following should be
added to net income in calculating net cash flow from operating activities using the
indirect method? a. an increase in inventory b. a decrease in accounts payable c. preferred
dividends declared and paid d. a decrease in accounts receivable ANS: D DIF: 2 OBJ: 02
21. Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method? a. depreciation expense b.
amortization of premium on bonds payable c. a loss on the sale of equipment d. dividends
declared and paid ANS: B DIF: 2 OBJ: 02 163 Chapter 16Statement of Cash Flows 22.
Which of the following below increases cash? a. depreciation expense b. acquisition of
treasury stock c. borrowing money by issuing a six-month note d. the declaration of a cash