2. Financial Statements

Cash Flows — Quiz

Test your understanding of cash flows with 5 practice questions.

Practice Questions

Question 1

A company’s cash flow statement shows cash flows from operating activities using the indirect method. If the company reported a gain on the sale of equipment of $$ \$12,000 $$ in its income statement, how should this gain be treated in the cash flow from operating activities section?

Question 2

A company’s cash flow statement shows a cash outflow of $$ \$40,000 $$ for the purchase of new machinery. The machinery had a useful life of 10 years and no salvage value. How should the depreciation of this machinery be treated in future cash flow statements prepared using the indirect method?

Question 3

A company’s accounts receivable decreased by $$ \$8,000 $$ during the year. How should this change be reflected in the cash flow from operating activities when using the indirect method?

Question 4

Which of the following would be subtracted from net income when preparing the cash flow from operating activities using the indirect method?

Question 5

A company’s cash flow statement shows a cash inflow of $$ \$100,000 $$ from the issuance of bonds. In which section of the cash flow statement would this transaction be reported?