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Home / Questions / If the indirect method is used to prepare a statement of cash flows, which of the followin

If the indirect method is used to prepare a statement of cash flows, which of the followin

If the indirect method is used to prepare a statement of cash flows, which of the following would be deducted from net income to arrive at net cash flows from operating activities?

 

a.

Increase in income taxes payable

b.

Increase in accrued liabilities

c.

Decrease in prepaid expenses

d.

Increase in accounts receivable

 

 

 

105.If the indirect method is used to prepare a statement of cash flows, which of the following would be added to net income to arrive at net cash flows from operating activities?

 

a.

Decrease in accounts payable

b.

Increase in accounts receivable

c.

Increase in inventory

d.

Decrease in prepaid expenses

 

 

 

106.The direct method of preparing a statement of cash flows

 

a.

will produce the same net amount as the indirect method.

b.

is more difficult to understand than the indirect method for the average reader.

c.

begins with net income in the operating activities section.

d.

is the overwhelming choice of most companies.

 

 

 

107.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Increase in Accounts Receivable -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Not used to adjust net income to calculate net cash flows from operating activities.

c.

Add to net income to arrive at net cash flows from operating activities.

 

 

 

108.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Interest Income (assume that cash received is equal to amount reported) -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Not used to adjust net income to calculate net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Subtract from net income to arrive at net cash flows from operating activities.

 

 

 

109.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Dividend Income (assume that cash received is equal to amount reported) -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Not used to adjust net income to calculate net cash flows from operating activities.

 

 

 

110.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Increase in Inventory -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Not used to adjust net income to calculate net cash flows from operating activities.

 

 

 

111.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Decrease in Prepaid Expenses -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Not used to adjust net income to calculate net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Subtract from net income to arrive at net cash flows from operating activities.

 

 

 

112.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Decrease in Accounts Payable -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Not used to adjust net income to calculate net cash flows from operating activities.

 

 

 

113.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements -- Increase in Accrued Liabilities -- indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Not used to adjust net income to calculate net cash flows from operating activities.

c.

Add to net income to arrive at net cash flows from operating activities.

Dec 10 2019 View more View Less

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