Under the Indirect Method for Preparing the Statement of Cash

question 112

Multiple Choice

Under the indirect method for preparing the statement of cash flows, decreases in current assets are _____ net income in the cash flows from operating activities section.

• A) subtracted from
• B) added to
• C) not used in calculating
• D) cannot tell from the information given

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Definitions:

Accrual Liabilities

Obligations that a company has incurred, for which invoices have not yet been received or payment has not been made.

Accounts Payable

Money owed by a business to its suppliers or creditors for goods and services received but not yet paid for.

Revolving Credit Agreement

A credit arrangement that allows a company or individual to borrow, repay, and borrow again up to a certain credit limit.

Commitment Fee

A fee charged by a bank for guaranteeing to have loanable funds available. The fee is charged on un borrowed amounts up to the maximum of the guarantee. See Revolving credit agreement.