A1: Financial Statements Question 1: 1A1-LS34 Dividends paid to company shareholders would be shown on the statement of cash flows as: *Source: Retired ICMA CMA Exam Questions. A. cash flows from investing activities. B. operating cash inflows. C. cash flows from financing activities. D. operating cash outflows. Dividends paid to company shareholders would be shown on the statement of cash flows as cash flows from financing activities. Financing activities include all long-term debt and shareholders' equity transactions. Question 2: 1A1-LS39 Which one of the following should be classified as an operating activity on the statement of cash flows? *Source: Retired ICMA CMA Exam Questions. A. The purchase of additional equipment needed for current production. B. A decrease in accounts payable during the year. C. The payment of a cash dividend from money arising from current operations. D. An increase in cash resulting from the issuance of previously authorized common stock. A decrease in accounts payable during the year should be classified as an operating activity on the statement of cash flows. The proceeds from the issuance of stock and the payment of a dividend are financing activities. Purchase of equipment is an investing activity. Question 3: 1A1-LS40 All of the following are limitations to the information provided on the statement of financial position except the: *Source: Retired ICMA CMA Exam Questions. A. judgments and estimates used regarding the collectability, salability, and longevity of assets. B. lack of current valuation for most assets and liabilities. C. omission of items that are of financial value to the business such as the worth of the employees. D. quality of the earnings reported for the enterprise. Earnings for the enterprise are reported on the income, not the statement of financial position (i.e. the balance sheet). Question 4: 1A1-CQ09 Pierre Company had the following transactions during the fiscal year ending December 31, year 3: • Sold a delivery van with a net book value of $5,000 for $6,000 cash, reporting a gain of $1,000. • Paid interest to bondholders for the amount of $275,000 • Declared dividends on December 31, year 3, of $.08 per share on the 1.3 million shares outstanding, payable to shareholders of record on January 31, year 4. No dividends were declared or paid in prior years. • Accounts receivable decreased from $70,000 on December 31, year 2 to $60,000 on December 31, year 3. • Accounts payable increased from $40,000 on December 31, year 2 to $45,000 on December 31, year 3. • The cash balance was $150,000 on December 31, year 2, and $177,500 on December 31, year 3. Which of the answers below describes the correct entry for Pierre Company's statement of cash flows on December 31, year 3 using the indirect method? A. The decrease of $10,000 in accounts receivable is reported as a $10,000 decrease in the operating section of the statement of cash flows. B. The $104,000 dividend payout is represented as an outflow of funds in the financing section. C. Financing activities include the $1,000 gain from the sale of the delivery van. D. The $1,000 gain from the sale of the delivery van is included in operating activities as a deduction. Under the indirect method of cash flow statement preparation, net operating cash flow is determined by adjusting net income. Using the indirect method, the full $6,000 received for the asset sale is included in the