Which of the Following Statements Regarding the Calculation of Cash

question 110

Multiple Choice

Which of the following statements regarding the calculation of cash flows from operating activities under the direct method is true?

• A)When the direct method is used,each revenue and expense account on the income statement is individually examined to calculate the cash flows from operating activities.
• B)Noncash revenues and expenses must be included in cash flows from operating activities when preparing a statement of cash flows using the direct method.
• C)Depreciation is reported as a cash inflow in the cash flows from operating activities when the direct method is used.
• D)A loss on the sale of a long-term asset is subtracted in the cash flows from operating activities when the direct method is useD.The direct method converts revenues to cash receipts and expenses to cash disbursements in order to determine the net cash flow from operating activities.Noncash revenues and expenses,including gains and losses,are not used in the calculation of operating cash flows using the direct method.

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Definitions:

FVTPL

Fair Value Through Profit or Loss, a classification under International Financial Reporting Standards for financial assets held for trading or designated upon initial recognition as measured at fair value, with changes in fair value recognized in profit or loss.

FVTOCI

stands for Fair Value Through Other Comprehensive Income, a classification under IFRS for financial assets that are measured at fair value with fluctuations recorded in other comprehensive income.

Share Price

The price at which a single share of a company's stock is bought or sold in the market.

ASPE

Accounting Standards for Private Enterprises, a set of accounting practices and principles for private companies in Canada.