When Preparing the Operating Section of the Statement of Cash

question 95

Multiple Choice

When preparing the operating section of the statement of cash flows using the direct method, which of the following statements is true?

• A) An increase in accounts payable is subtracted from cost of goods sold.
• B) An increase in accounts receivable is added to sales.
• C) Depreciation expense is added to cash flows.
• D) Gains on sales of long term assets are subtracted from cash flows.

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Definitions:

Landlord's Consent

Landlord's consent is the approval a landlord must give for certain actions by the tenant, such as alterations to the property or subletting.

Majority Rule

A decision-making process in which the preferences or votes of more than half of the members of a group determine the outcome.

Minority Rule

A governance structure or situation where a smaller segment of the population holds disproportionate power or authority over the majority.

Illegal Possession

Holding or controlling property or substances in violation of the law.