When Using the Indirect Method to Prepare the Operating Section

question 16

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 the above are added to net income to arrive at cash flow from operating activities.

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Definitions:

Supply Curve

A graphical representation showing the quantity of a good that producers are willing to supply at different prices.

Producer Surplus

The difference between the amount producers are willing and able to sell a good for and the amount they actually receive.

Equilibrium Price

The price at which the quantity of goods supplied matches the quantity of goods demanded in the market.

Tooth Decay

The destruction of tooth enamel leading to cavities, influenced by factors like bacteria, sugary diets, and poor dental hygiene.