AA (14)

Cash receipts and cash payments involving the sale or purchase of assets used to earn

revenue over a period of time are called financing activities.

• True

• False

Increases in long-term liabilities generally result in a source of cash that is included in the investing activities section of the statement of cash flows.

• True

• False

The cash receipts and payments necessary to operate a business on a day-to-day basis are known as operating activities.

• True

• False

Using the indirect method, cash flows from operating activities are determined by adjusting net income for items that increase or decrease the cash in the business.

• True

• False

Depreciation expense does not involve a cash outflow; therefore, the amount of the expense is subtracted from net income in determining cash flows from operating activities.

• True

• False

The statement of cash flows is prepared on a cash basis.

• True

• False

Increases in current liabilities represent a use of cash and are subtracted from net income to determine the cash flow from operating activities.

• True

• False

Regardless of the method used to prepare the statement of cash flows, the total cash provided by (used for) operating activities is the same.

• True

• False

Listing cash flows from operating activities as cash receipts and cash payments is called the indirect method.

• True

• False

Increases in noncash current assets represent uses of cash and are deducted from net income to determine cash flow from operations.

• True

• False