Accounting: 3 more re: cash flow?

Question

1. Which one of the following is added to income in determining cash flow from operations?

a. increase in inventory

b. decrease in wages payable

c. loss from sale of land

d. gain from selling treasury stock above its original cost

2. An increase in inventory is reported in a statement of cash flows using the indirect method as a(n)

a. addition to net income in arriving at net cash flows from operating activities

b. deduction from net income in arriving at net cash flows from operating activities

c. cash outflow from investing activities

e. cash outflow from financing activities

3. A company uses the direct method of preparing the statement of cash flows. Current year depreciation expense can be found on the

a. balance sheet and income statement

b. income statement and statement of cash flows

c. statement of cash flows and balance sheet

d. income statements only

e. statement of cash flows only

Answer 1

1. Which one of the following is added to income in determining cash flow from operations?

c. loss from sale of land

Like depreciation, you add this back when using the indirect method.

2. An increase in inventory is reported in a statement of cash flows using the indirect method as a(n)

b. deduction from net income in arriving at net cash flows from operating activities

3. A company uses the direct method of preparing the statement of cash flows. Current year depreciation expense can be found on the

d. income statement only

When using the direct method, there's no place for adjustments like depreciation in the cash flow statement.

Answer 2

1.d, 2.b, 3.b.