Which of the Following Statements Does Not Correctly Describe an Adjustment

question 95

Multiple Choice

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

• A)An increase in wages payable will be added to net income.
• B)A gain on the sale of a depreciable asset will be subtracted from net income.
• C)An increase in prepaid expenses will be subtracted from net income.
• D)An increase in income taxes payable will be subtracted from net income.

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Definitions:

Coupon Bonds

Bonds that pay the holder a fixed interest rate (the coupon) over a specified period, typically until maturity when the principal, or face value, is repaid.

Market Yield

The rate of return anticipated on a bond if it is held until the maturity date, factoring in its current price, interest payments, and term length.

Treasury Bills

Short-term government securities issued at a discount from face value and mature at par.

Market Risk Premium

The extra return expected by investors for holding a risky market portfolio instead of risk-free assets.