Bob owns a used car dealership. All of his revenue is from cash sales or in-house financing. Which method of presenting cash flows should he use and

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Bob owns a used car dealership. All of his revenue is from cash sales or in-house financing. Which method of presenting cash flows should he use and why?

Question 1 options:

Direct method because some of his sales do not deal with direct cash

Direct method because all of his sales deal with cash or items that will be quickly converted to cash

Indirect method because he has sales that deal with financing customers and giving them loans

Indirect method because of the amount of money he has to invest in inventory

Using the direct method, how should taxes be treated on the cash flow statement?

Question 2 options:

Tax amounts are only included in the operating section of the cash flow statement

Tax amounts should be directly tied to the activity (operating, financing, investing)

Tax amounts are only included in the financing section of the cash flow statement

Tax amounts should not be included as an activity-related expense

Sara’s Cake Company is looking at the price of sugar and trying to find out if they can source a cheaper price for the sugar. What type of cash activity is this?

Question 3 options:

Operating activity

Financing activity

Investing activity

Marketing activity

When looking at the following operating, investing, or financing activities, which of the following increases cash in the business?

Question 4 options:

Issuing stock

Adjusting payroll

Loaning to employees

Encouraging retirement

When using the indirect method of calculating cash flows, what do you subtract from net income to get cash flow from operating activities?

Question 5 options:

Selling and administrative expenses

Cost of goods sold and liabilities

Inventory and payroll expenses

Current assets and current liabilities

When looking at the balance sheet, if you look at net income and pay out dividends, what do you have left in the business?

Question 6 options:

Gross profit

Retained earnings

Dividends payable

Amortization

Which of the following transactions could increase revenue but not necessarily increase cash flow?

Question 7 options:

An increase in cash sales

A decrease in accounts payable

An increase in accounts receivable sales

A decrease in electricity bill

When calculating cash flows, which method starts with net income taken from the income statement?

Question 8 options:

The indirect method

The direct method

Always the direct and sometimes the indirect method

Both the indirect and direct methods

Which of the following is considered a financing activity?

Question 9 options:

Cash purchase of a building

Cash receipts from sales

Cash payment of notes payable

Cash received from interest on loans

Which of the following is considered a function of financing activities on the cash flow statement?

Question 10 options:

It allows buying and selling of treasury stock

It affects current assets and liabilities on the balance sheet

It affects net income on the income statement

It increases future long-term assets

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