When the Operating Activities Section of the Statement of Cash

question 77

Multiple Choice

When the operating activities section of the statement of cash flows is reported using the direct method,the FASB requires:

• A)A reconciliation to the statement of cash flows under the indirect method.
• B)A reconciliation of net income to net cash provided or used by operating activities.
• C)Footnotes to the financial statements disclosing the difference between net income and the cash provided or used by financing activities.
• D)The income statement to be prepared under the cash basis of accounting.
• E)Noncash investing and financing activities must be included in the statement of cash flows.

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Definitions:

Purchase of Services

The act of acquiring services rather than physical goods from another party.

Standards of Conduct

A set of guidelines or principles designed to govern behaviors and actions in a professional or organizational environment.

Impropriety

The quality of being inappropriate, unethical, or not conforming to the expected standards of conduct.

Contract Agreement

A legally binding document that describes the terms of a deal or partnership between two or more parties.