Question

1) The cash flow statement's primary purpose is to provide information

		about the changes in assets, liabilities, and owners' equity of an entity during a period.
		about the cash receipts and cash payments of an entity during a period.
		about the entity's ability to meet its obligations and to pay dividends.
		that is useful in assessing future cash flow prospects.

2)

In a period of rising prices, the inventory method which tends to give the lowest reported cost of goods sold is

		FIFO.
		LIFO.
		average cost.
		None of these choices are correct.

3)

Which of the following statements is (are) true?
(I) Company should add back realized gains to net income to arrive at net cash flow from operating activities.
(II) Companies report the cash flows from purchases and sales of trading securities as cash flows from operating activities.

		I only
		II only
		Both statements are true
		Both statements are false

Answer 1

1) The cash flow statement's primary purpose is to provide information about the cash receipts and cash payments of an entity during a period.

2nd option

2) In a period of rising prices, the inventory method which tends to give the lowest reported cost of goods sold is FIFO.

1st option

3) Company should only add back realized gains to net income to arrive at net cash flow from operating activities and should not report the cash flows from purchases and sales of trading securities as cash flows from operating activities.

l only

1st option