Which of the Following Statements Is CORRECT

question 134

Multiple Choice

Which of the following statements is CORRECT?

• A) In the statement of cash flows,a decrease in accounts receivable is subtracted from net income in the operating activities section.
• B) Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity,not an operating activity.
• C) In the statement of cash flows,a decrease in accounts payable is subtracted from net income in the operating activities section.
• D) In the statement of cash flows,depreciation is subtracted from net income in the operating activities section.
• E) In the statement of cash flows,a decrease in inventories is subtracted from net income in the operating activities section.

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Definitions:

Depreciation Method

A systematic approach used to allocate the cost of a tangible asset over its useful life.

Double Declining-Balance

An accelerated method of depreciation which doubles the normal depreciation rate, reducing the value of an asset more quickly in its early years.

Straight-Line Method

A technique for calculating an asset's depreciation by uniformly distributing its cost throughout its anticipated lifespan.

Residual Value

Residual value is the estimated value of an asset at the end of its useful life.