I. Multiple Choice: Choose the letter of the best answer. 1. Which of the following examples of cash flows is from operating activities? a. Repayment of cash advances b. Cash payments made to suppliers of goods and services c. Proceeds from sale of investments d. Bank borrowings repayments 2. From the direct method of constructing cash flow statements, these are described in the summary of the payroll journal for the period. a. Proceeds from issuance of common stock b. Cash paid to employees c. Cash receipts from customers d. Dividends paid 3. Which of the following examples of cash out flows is from operating activities? a. Repayment of cash advances b. Cash payments made to suppliers of goods and services c. Proceeds from sale of investments d. Bank borrowings repayments 4. It is a short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant amount of risk of changes in value. a. Cash flows b. Financing activities c. Cash equivalents d. Investing activities 5. From the indirect method of constructing cash flow statements, these are described as net increase in the common stock and additional paid-in capital accounts during the period. a. Proceeds from issuance of common stock b. Cash paid to employees c. Cash receipts from customers d. Dividends paid II. Identification: Identify the best answer for each item. 6. These are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. 7. These are transactions that do not require cash or cash equivalents should be excluded. 8. This method presents operating cash flows as reconciliation from profit to cash flow. This means that depreciation is factored into your calculations. Prepared by: VENUS G. BALNAO-ELVEÑA ENGINEERING ECONOMY Module 5 9. This refers to gains and losses from investments. Inflows include sales from business assets and payments from loans made by your business. Outflows include purchases of assets and loans made by your business. 10. In this method, operating cash flows are presented as a list of ingoing and outgoing cash flows. Essentially, the direct method subtracts the money you spend from the money you receive. II. True or False 11. Dividends are generally classified as a financing activity since they are a cost of obtaining financial resources. 12. Cash flow statements are a measurement of how well a company is able to generate cash to fund operating expenses and pay debt obligations. 13. The components of cash and cash equivalents must not be disclosed and a reconciliation of the amounts in the statement of cash flows with the cash and cash equivalent items reported in the statement of financial position (balance sheet) must be presented. 14. When you use the indirect method of preparing the statement of cash flows, the operating section starts with net income from the income statement. 15. Cash receipts and payments on behalf of customers reflect the activities of the customers rather than those of the entity. 16. When preparing the statement of cash flows, transactions that do not require cash or cash equivalents should be included. 17. Noncash transactions must be disclosed elsewhere in the financial statements. 18. In regard to transactions in a foreign currency, the cash flows shall be recorded in the entity's functional currency and for this purpose; the exchange rate between the functional currency and the foreign currency at the date of the cash flow shall be applied to the related foreign currency amount. 19. Issue of shares against assets acquired is an example of noncash transaction. 20. Purchase of property, plant, and equipment is an example of cash inflow from investing activities.