Question

QUESTION 7 The appropriate section in the statement of cash flows for reporting the net income is: o Operating activities, O Financing activities. O Investing activities. O Schedule of noncash investing or financing activity O This is not reported on the statement of cash flows. QUESTION 8 The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is Operating activities. O Financing activities. O Investing activities. Schedule of noncash investing or financing activity. O This is not reported on the statement of cash flows.

Answer 1

Answers:

7. Operating Activities

8. Financing Activities

9. A decrease in cash flow from operating activities

10. Operating Activities

Explanations:.

7. The appropriate section in the statement of cash of cash flows for reporting the net income is :

Option A : Operating Activities

In indirect method of preparing cash flow statement, cash flow from operating activities begins with net income.

8. The appropriate section in the statement of cash flows for reporting the issuance of common stock is :

Option B: Financing Activities

Issuance of common stock is a financing activity, and thus it should come under the respective section.

9. An increase in the accounts receivable account during the year should be reported in the statement of cash flows as:

Option C: A decrease in cash flow from operating activities.

In the indirect method of preparing cash flows statement, changes in accounts receivable or other current assets (except cash) must be considered. An increase of these current assets must be treated as a decrease in cash flow form operating activities and vice-versa.

10. The appropriate section in the statement of cash flows for reporting the cash payment of wages is :

Option A : Operating Activities

Payment of wages, salary and other expenses must be considered as reduction in cash flow from operating activities, but only under the direct method of preparing cash flows.