Part I. Questions 1-10 are worth 2 points each. Collecting the principal on a lo

Question

Part I. Questions 1-10 are worth 2 points each. Collecting the principal on a loan to another company would be reported on the investing activities section of the statement of cash flows. A. True B. False 1. When a company pays cash to repurchase its own common stock, this is reported as a cash outflow in the financing activities section of the statement of cash flows A. True B. False 2. 3. Paying wages and salaries to employees is classified as a cash outflow in the operating activities section of the statement of cash flows. A. True B. False 4. A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. A. True B. False Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, a loss on the sale of an asset would be added to net income. A. True B. False 5. Vertical analysis of financial statements is accomplished by preparing common-size statements. A. True B. False 6. 7. When computing the net cash provided by operating activities under the indirect method on the statement of cash flows, an increase in prepaid expenses would be added to net income. A. True B. False 8. As the accounts receivable turnover ratio decreases, the average collection period increases. A. True B. False Page 2 of 12

Explanation / Answer

1. Collecting principal on loan on other company is reported in a financing activities in the statement if cash flows thus the statement is false.

2. The statement that when company pays cash to repurchase its own share it is reported as cash outflow in Financing activities is correct. Thus statement is true.

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