1. In the statement of cash flows, increases in a company's capital stock accounts are treated as a "use" rather than as a "source" of cash.
FALSE
2. Which of the following would be considered a "use" of cash for purposes of constructing a statement of cash flows?
A. an increase in accounts payable.
B. an increase in prepaid expenses.
C. an increase in accrued liabilities.
D. an increase in accumulated depreciation.

3. In a statement of cash flows, a change in prepaid expenses would be classified as:
A. an operating activity.
B. a financing activity.
C. an investing activity.
D. a noncash item that need not appear on the statement of cash flows.

4. In a statement of cash flows, a change in the inventories account would be classified as:
A. an operating activity.
B. a financing activity.
C. an investing activity.
D. a noncash item that need not appear on the statement of cash flows.

5. An increase in the plant and equipment account of $100,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:
A. an addition to net income of $100,000 in order to arrive at net cash provided by operating activities.
B. a deduction from net income of $100,000 in order to arrive at net cash provided by operating activities.
C. an addition of $100,000 under investing activities.
D. a deduction of $100,000 under investing activities.

6. Which of the following should be classified as an investing activity on a statement of cash flows?
A. cash used to purchase land.
B. cash collected on a loan made to a supplier.
C. cash received from the sale of a stock investment.
D. both A and C above
E. all of the above

7. An increase in the bonds payable account of $200,000 over the course of a year would be shown on the company's statement of cash flows prepared under the