An Increase in Accounts Receivable of $1,000 Over the Course

question 208

Multiple Choice

An increase in accounts receivable of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:

• A) an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
• B) a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
• C) an addition of $1,000 under financing activities.
• D) a deduction of $1,000 under financing activities.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities, represented by the shareholders' investment and retained earnings.

Bond Offering

The process of issuing bonds to investors as a way of raising capital, where the issuer owes the holders a debt.

Indenture

A legal document that describes all the details of a debt security to potential buyers.

Covenant

A legal agreement or contract specifying certain conditions or actions that must be met or complied with.