Indirect statement of cash flows based problem


Problem 1: Concerning the Indirect Statement of Cash Flows, select the correct statement.

A)The management of a company would mostly utilize the Indirect Statement of Cash Flows as a management tool since it starts with Net Income from the Income Statement.

B)The management of a company would not normally distribute the Indirect Statement of Cash Flows as a statement within its annual reports because it would most likely confuse the average reader.

C)The management of a company would most likely distribute the Indirect Statement of Cash Flows as a statement within its annual reports because it starts with Net Income and ends in the current cash balance which increases reader confidence in the report.

D)The management of a company would most likely distribute the Indirect Statement of Cash Flows as a statement within its annual reports because it does not present any relation to the other statements of the report, therefore it is least likely to confuse the reader.

Problem 2: If accounts payable have increased during a period _______.

A) revenues on an accrual basis are less than revenues on a cash basis

B) expenses on an accrual basis are less than expenses on a cash basis

C) expenses on an accrual basis are the same as expenses on a cash basis

D) expenses on an accrual basis are greater than expenses on a cash basis

Problem 3: An estimate based on an analysis of receivables shows that $780 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Allowance for Doubtful Accounts is _______.

$110
$780
$670
$890

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Accounting Basics: Indirect statement of cash flows based problem
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