An Example of an Item That Is Deducted from Net

question 48

Multiple Choice

An example of an item that is deducted from net income when preparing the operating activities section of the statement of cash using the indirect method is:

• A) depreciation expense.
• B) compensation expense related to stock option plans.
• C) income from an investment accounted for using the equity method.
• D) unrealized losses on trading investments

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Definitions:

Debtor in Possession

A business entity that retains control of its assets and continues operations while undergoing a reorganization under bankruptcy laws.

Trustee Functions

The roles and responsibilities carried out by a trustee, typically involving managing assets held in trust on behalf of beneficiaries.

Bankruptcy

A legal status for individuals or entities that cannot repay the debts they owe to creditors, leading to a court-managed distribution of assets to creditors.

Farming Business

An enterprise engaged in the cultivation of crops and/or the raising of animals for the purpose of producing food, fiber, and other agricultural products.