A Company with Substantial Operating Profits Prepares Its Statement of Cash

question 18

Multiple Choice

A company with substantial operating profits prepares its statement of cash flows using the indirect method.The gain on the sale of a long-term investment should be disclosed separately as a(n)

• A) inflow from operating activities.
• B) adjustment to net income in the reconciliation of net income to cash from operating activities.
• C) inflow from investing activities.
• D) outflow from investing activities.

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the expected costs based on efficient use of resources.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allocated for the actual production level, often driven by efficiency in using the variable overhead resources.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost allocated, based on the actual amount of the allocation base used.

Supplies

Materials and items used in the daily operations of a business that do not directly become part of the final product.