Chapter 5

Question 1

Cash Equivalents

Answer 1

short-term, highly liquid investments such as Treasury bills, commercial paper and money market funds

Question 2

Direct Method

Answer 2

reporting the information contained in the last column of the adjustment worksheet

Question 3

Financing Activities

Answer 3

obtaining resources from owners and providing them a return on their investment, and obtaining resources from the creditors and repaying those borrowings

Question 4

Indirect Method

Answer 4

a method for creating a statement of cash flows a company may use during any given reporting period. The indirect method uses accrual accounting information to present the cash flows from the operations section of the cash flow statement

Question 5

Investing Activities

Answer 5

cash inflows and outflows from (1) acquiring and selling productive assets such as property, plant, and equipment, (2) acquiring and selling investment securities, (3) lending money and collecting on those loans

Question 6

Non-cash Investing and Financing Activities

Answer 6

some investing and financing activities affect a company’s financial position but not the company’s cash flows during the period

Question 7

Operating Activities

Answer 7

all transaction relating to a company’s delivering on producing its good for sale and providing services

Question 8

Pro Forma

Answer 8

a prediction of what the actual cash flow statement will look like in future years if the operating, investing, and financing plans are implemented

Question 9

Statement of Cash Flows

Answer 9

summarize a company’s cash flows for a period of time