Using the Indirect Method of Preparing a Statement of Cash

question 60

Multiple Choice

Using the indirect method of preparing a statement of cash flows, a loss on the sale of a capital asset is:

• A) ignored
• B) subtracted in the operating activities section
• C) added in the operating activities section
• D) added in the investing activities section

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Definitions:

Economic Rents

Earnings exceeding the minimum amount necessary to keep a factor of production in its current use, often associated with imperfect competition or unique resources.

Land Ownership

The legal right to possess, use, and manage a piece of land.

Compound Interest

The accumulation of money that builds over time in an investment or interest-bearing account as new interest is earned on previous interest that is not withdrawn.

Savings Account

A deposit in a commercial bank or thrift institution on which interest payments are received; generally used for saving rather than daily transactions; a component of the M2 money supply.