When Using the Indirect Method to Prepare the Operating Section

question 41

Multiple Choice

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?

• A) Increase in accounts receivable.
• B) Gain on sale of land.
• C) Amortization of patent.
• D) All of these are added to net income to arrive at cash flow from operating activities.

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Definitions:

Lower Control Limit

A statistic used in process control charts to signify the lower threshold below which a process is considered to be out of control.

Defect Rate

The proportion of manufactured items that do not meet the prescribed quality standards.

Control Chart Limits

the pre-determined upper and lower boundaries on a control chart within which a process is considered to be in control and performing as expected.

P-chart

A type of control chart used in statistical quality control to monitor the proportion of defective units in a process.