 In this presentation, we will take a look at multiple choice questions related to the statement of cash flows. First question, cash equivalents are, A, investments readily convertible to a specific amount of cash? Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. B, investments that mature in less than a year. C, monopoly money. D, our assets that are not very liquid. E, cash in in the bank rather than physical money. So we'll go through this again and see if we can use the process of elimination to narrow this down. Cash equivalents are, A, investments readily convertible to a specific amount of cash. So that seems fairly reasonable. If we don't know exactly what it is, I'm going to keep that for now and go through the rest of them. B says investments that mature in less than a year. And we might think, well, if it matures in less than a year, then that's more liquid than if it was more than a year. So I'll keep that one for now. C says monopoly money. And that's probably not true, since that's like a game. And then D says our assets that are not very liquid. Now, if we if we understand the concept of liquidity, then we would think that we would have something that would be very liquid because cash is very liquid. So if we want it to be something like cash or equivalent to cash, then we would think it'd be very liquid, not unliquid. So I would think D would not be correct. And then E says cash in the bank rather than physical money. So again, if we didn't really know what cash equivalent is, that might seem reasonable might say, well, you know, cash in the bank is that different than money cash. So we'll keep A, B and E for now. Go through it again. Cash equivalents are A, investments readily convertible to a specific amount of cash. B, investments that mature in less than a year. Or E, cash in the bank rather than physical money. Now, if we narrow this down between A and B, notice that that B is kind of A is kind of a subset of B, meaning like, if we say that B are investments that mature in less than a year, and A says investments that are readily convertible to cash. So B basically sets a time limit of a year. And A seems like it's almost setting a more specific time limit saying that, you know, it's we can convert it to cash really soon. So if we were to say that B would would be a cash equivalent, then we would think that A would definitely be a cash equivalent, A being kind of more of a stringent requirement than B. So on the other hand, if B is a cash equivalent, then it doesn't necessarily if A is a cash equivalent, it doesn't necessarily mean that everything will also be a cash equivalent for B, because A is going to be more restrictive. So because A is a more restrictive definition, I'm leaning towards A would probably be, you know, more restrictive given it's a cash equivalent, as opposed to this one, B, which is actually for current assets. This is the definition or close to a definition of what a current asset is, something that's going to be maturing within a year. So it's not going to be B. I'm going to choose A over B. And then E says cash in the bank rather than physical money. Now this would even be more of a stringent kind of requirement. This would would say that a cash equivalent is basically a digital cash, as opposed to physical cash. But that's not really what the difference is if when we think of cash, if it's digital cash in the bank, that's still cash. I mean, the checking accounts in the bank, and we call that cash. So the equivalents are something different. There are going to be some types of investments that are very, very liquid. So we're going to go with the answer being A. So cash equivalents are investments readily convertible to a specific amount of cash. Next question. The statement of cash flows. A includes assets, liabilities, and equity. B includes income and expenses. C include operating, investing, and financing activities. D, the accounting equation. E, retained earnings, net income, and dividends. So let's go through that again. See if we can use the process of elimination. The statement of cash flows either A includes assets, liabilities, and equity. Now assets, liabilities, and equity is basically the balance sheet. So the statement of cash flows is not the balance sheet. So I would think that that would not be correct. So I'm going to cross that out. B says includes income and expenses. And that's basically what's on the income statement. So again, I would think that it wouldn't be exactly the same as the income statement. So I'm going to say that's probably not it. C says includes operating, investing, and financing activities. That sounds reasonable because that's not the balance sheet income statement or equity statement. D says the accounting equation. That's basically going to be the balance sheet again, assets, liabilities, and equity. So that's not it. And E says retained earnings, net income, and dividends. And that's kind of like what's on the statement of equity. So it would be a company's equity if we have retained earnings here. So it's common stockholders equity. So I don't think it's E. I would think that C then is what would just be there from the process of elimination. And so the final answer then would be the statement of cash flows. C includes operating, investing, and financing activities. Next question. The statement of cash flows is A, another name for the balance sheet. B reports the change in equity. C reports the change in cash by category of operating, investing, financing activities. D reports the change in cash by revenue minus expenses. E, not useful. Let's go through this again. The statement of cash flows is A, another name for the balance sheet. That's probably not the case. Statement of cash flows different than the balance sheet. So I'll cross that out. B says reports the change in equity. And it has a change in change but it's not I don't think it's equity but I'll keep that for now. C says reports the change in cash by category of operating, investing, and financing activities. That sounds pretty reasonable. I'll keep that. D says reports the change in cash by revenue minus expenses. Now that one's a little tricky because it says the change in cash and that's a cash flow statement but then it says it's revenue minus expenses and that's net income. So the reason that's a little tricky is because revenue is not on a cash basis. That's on a cruel basis. So revenue and expenses are typically thought of as a cruel basis terms whereas we're looking at cash flow. So it's actually not D and then E says not useful and we hope it's useful if we're making it. So it's not E. So we're left with B and C. So let's go through this again. The statement of cash flows is either B reports change in equity or C reports the change in cash by category of operating, investing, and financing activities. So B is going to be the statement of owner's equity, statement of equity, or stockholders' equity. So it's not going to be that. It's actually going to be C and that'll have our list here. Note oftentimes when we have a problem that's an answer that has a longer answer, sometimes that's because it's trying to be more specific and eliminate any kind of possibility of being wrong. So if we see an answer that's a little bit longer, then we might think if we have no other idea, maybe that's going to be it because maybe they're trying to eliminate any possibility for incorrectness within the answer and therefore that takes a little bit more lawyer speak, a little bit longer answer. Any case the answer will be C. The statement of cash flows is C report change in cash by category of operating, investing, and financing activities.