Which of the Following Statements Regarding Calculation of Cash Flows

question 56

Multiple Choice

Which of the following statements regarding calculation of cash flows from operating activities under the indirect method is true?

• A) When the indirect method is used, changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flows from operating activities.
• B) When the indirect method is used, depreciation expense is added to net income as a step in the process of calculating net cash flows from operating activities.
• C) When the indirect method is used, gains on the sale of property, plant and equipment are added to convert net income to net cash flows from operating activities.
• D) When the indirect method is used, changes in long-term liabilities are subtracted to convert net income to net cash flows from operating activities.

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Definitions:

Serial Processing

A method of information processing in which operations are carried out one after another in a sequence.

Explicit Memory

A type of long-term memory involving conscious recollection of factual information, previous experiences, and concepts.

Recognition

The identification of something as having been previously seen, heard, known, etc.

Recall

The mental process of retrieving information from the past, often without the aid of external cues.