When preparing the statement of cash flows using the indirect method, an increase in inventories would appear as: a

1. When preparing the statement of cash flows using the indirect method, an increase in inventories would appear as:
   a. a decrease in the operating activities section
   b. an increase in the operating activities section
   c. a use of cash in the investing activities section
   d. a source of cash in the investing activities section

a decrease in the operating activities section

2. When preparing the statement of cash flows using the indirect method, an increase in accounts payable would appear as:
   a. a decrease in the operating activities section
   b. an increase in the operating activities section
   c. a use of cash in the investing activities section
   d. a source of cash in the investing activities section

an increase in the operating activities section

3. When preparing the statement of cash flows using the indirect method, the payment of dividends would appear as:
   a. a decrease in the operating activities section
   b. an increase in the operating activities section
   c. a use of cash in the financing activities section
   d. a source of cash in the financing activities section

a use of cash in the financing activities section

4. When preparing the statement of cash flows using the indirect method, the sale of marketable securities would appear as:
   a. a use of cash in the investing activities section
   b. a source of cash in the investing activities section
   c. a use of cash in the financing activities section
   d. a source of cash in the financing activities section

a source of cash in the investing activities section

5. In a statement of cash flows, interest received from sources other than a company's investments would be classified as cash inflows from:
   a. lending activities.
   b. operating activities.
   c. investing activities.
   d. financing activities.

operating activities.

6. An example of an item that is deducted from net income when preparing the operating activities section of the statement of cash using the indirect method is:
   a. depreciation expense.
   b. compensation expense related to stock option plans.
   c. income from an investment accounted for using the equity method.
   d. unrealized losses on trading investments

income from an investment accounted for using the equity method.

7. Which of the following is the correct formula for calculating cash collections from customers?
   a. sales for the period plus accounts receivable at the beginning of the period
   b. sales for the period plus accounts receivable at the beginning of the period minus accounts receivable at the end of the period
   c. sales for the period plus accounts receivable at the end of the period
   d. sales for the period plus accounts receivable at the end of the period minus accounts receivable at the beginning of the period

sales for the period plus accounts receivable at the beginning of the period minus accounts receivable at the end of the period

8. Fizzzle Inc. sold a piece of equipment during the period for $230,000 and recorded a gain of $45,000 on the sale. How should this gain be treated when preparing the operating activities section of the statement of cash flows using the indirect method?
   a. A sale of equipment is an investing activity

the transaction will not affect the operating activities section.
b. The gain is added back to net income in the operating activities section.
c. The gain is subtracted from net income in the operating activities section.
d. The entire sales price is subtracted from net income in the operating activities section.;The gain is subtracted from net income in the operating activities section.

9. The expense incurred by issuing stock options should be:
   a. classified as a financing activity.
   b. added back to net income in the operating activities section.
   c. subtracted from net income in the operating activities section.
   d. does not appear in the statement of cash flows.

added back to net income in the operating activities section.

10. Which of the following companies would you expect to report significant amounts of cash provided by financing activities?
    a. A yet-to-be-profitable biotechnology company.
    b. A mature company operating in the oil refinery industry.
    c. A profitable established company in the retail industry.
    d. A large multinational pharmaceutical company.

A yet-to-be-profitable biotechnology company.