SRJ Corporation Entered into the Following Transactions: • the Accrual

question 116

Multiple Choice

SRJ Corporation entered into the following transactions: • The accrual of interest expense on a six-month note payable.
• Collected cash for services to be provided within the next six months.
• The reclassification of short-term debt to long-term debt.
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Which of the following statements is correct with respect to determining the net cash flow from operating activities on a statement of cash flows?

• A)The increase in interest payable for the accrual of interest expense is added to net income.
• B)Collecting cash for services to be provided in the future is subtracted from net income.
• C)The reclassification of short-term debt to long-term debt is subtracted from net income.
• D)Collecting cash for services to be provided in the future does not require an adjustment to net income.

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Definitions:

Face Value

The nominal value or dollar value of a security stated by the issuer, typically referring to the value stated on a coin, banknote, stamp, or bond.

Straight-Line Method

A depreciation method that allocates an asset's cost evenly over its useful life.

Accrued Interest

Interest that has been incurred but not yet paid, typically reported as a liability on the balance sheet until it is paid out.

Premiums

Additional amounts paid over the normal cost or value, often related to insurance policies or bond prices above their face value.