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Financial Accounting, 7e Harrison/Horngren Test Item File Chapter 12: The Statement of Cash Flows 12.1-1 The statement of cash flows is presented as of a specific date in time. Answer: False LO: 12-1 Diff: 1 EOC: E12-14 12.1-2 The statement of cash flows is used by the firms creditors to evaluate the firms ability to pay dividends. Answer: False LO: 12-1 Diff: 1 EOC: E12-14 12.1-3 The statement of cash flows reports the investments the company is making in long-term assets. Answer: True LO: 12-1 Diff: 1 EOC: E12-14 12.1-4 Highly liquid short-term investments that can be converted into cash quickly are included in the definition of cash. Answer: True LO: 12-1 Diff: 2 EOC: E12-14 12.1-5 Investments in U.S. Government Treasury bills are classified as cash equivalents. Answer: True LO: 12-1 Diff: 2 EOC: E12-14 12.1-6 The statement of cash flows helps predict future cash flows. Answer: True LO: 12-1 Diff: 2 EOC: E12-14 12.1-7 A statement of cash flows: A. is typically prepared at the request of major creditors. B. may be combined with the balance sheet. C. may be combined with the income statement at the option of management. D. is a basic financial statement required for publicly-held companies. Answer: D LO: 12-1 Diff: 1 EOC: E12-14 12.1-8 Highly liquid short-term investments that are easily convertible into cash are called: A. cash reserves. B. accounts receivable. C. trading securities. D. cash equivalents. Answer: D LO: 12-1 Diff: 1 EOC: E12-14 12.1-9 The statement of cash flows is designed to fulfill all of the following purposes except to: A. assess the collectibility of accounts receivable. B. show the relationship of net income to changes in the companys cash. C. help predict future cash flows. D. evaluate management decisions. Answer: A LO: 12-1 Diff: 2 EOC: E12-14 12.1-10 Creditors analyze the statement of cash flows to det