Which of the Following Statements Is false regarding How the Cash

question 151

Multiple Choice

Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare the operating activities section?

• A) Cash proceeds from the sale of the equipment would be reported as a cash inflow in the investing activities section.
• B) The cash paid to purchase equipment would be reported as a cash outflow in the investing activities section
• C) Depreciation expense would be added to net income in the operating activities section.
• D) A loss on the sale of the equipment would be subtracted from net income in the operating activities section

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Definitions:

Accounting Records

Documents that track and record the financial transactions and activities of an entity, used for auditing and financial analysis.

Supplies on Hand

The current inventory of consumable items or materials available for use by a business.

Insurance Expired

The portion of an insurance premium that has been allocated to the expired portion of the insurance term.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.