Which Item Is a Noncash Item That Would Be Added

question 14

Multiple Choice

Which item is a noncash item that would be added to net income to convert it to cash flow from operating activities?

• A)Accounts receivable.
• B)Depreciation.
• C)Accounts payable.
• D)Inventory.
• Use the indirect method to answer questions 7-10.The following information is available for Armstrong Company:
• \[\begin{array} { l r l r }
• \text { Net income } & \$ 450 & \text { Increase in plant and equip. } & \$ 170 \\
• \text { Depreciation expense } & 80 & \text { Payment of dividends } & 10 \\
• \text { Decrease in accts. receiv. } & 20 & \text { Increase in long-term debt } & 100 \\
• \text { Increase in inventories } & 15 & \text { Decrease in accounts payable } & 30
• \end{array}\]

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Definitions:

Highly Marketable Securities

Securities that can be easily sold or converted into cash quickly without a significant loss in value.

Treasury Bills

Short-term government securities with maturities of one year or less, sold at a discount from their face value.

Warehouse Receipts

Documents that provide proof of ownership of commodities that are stored in a warehouse for protection and future sale.

Cross-Hedging

A strategy used to manage risk by hedging a position in one asset with a position in another asset that has a similar price movement but is not identical.