Question Details

Starting with net income and adjusting it for items 



1.	Flynn Company reported a net loss of $30,000 for the year ended December 31, 2011. During the year, accounts receivable decreased $15,000, merchandise inventory increased $24,000, accounts payable increased by $30,000, and depreciation expense of $15,000 was recorded. During 2011, operating activities
a.	used net cash of $6,000.
b.	used net cash of $24,000.
c.	provided net cash of $6,000.
d.	provided net cash of $24,000.

2.	Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the
a.	direct method.
b.	indirect method.
c.	working capital method.
d.	cost-benefit method.


	3.	In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is
a.	deducted from net income.
b.	added to net income.
c.	ignored because it does not affect income.
d.	ignored because it does not affect expenses.


	4.	Using the indirect method, patent amortization expense for the period
a.	is deducted from net income.
b.	causes cash to increase.
c.	causes cash to decrease.
d.	is added to net income.


5.	In developing the cash flows from operating activities, most companies in the U. S.
a.	use the direct method.
b.	use the indirect method.
c.	present both the indirect and direct methods in their financial reports.
d.	prepare the operating activities section on the accrual basis.




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