Smith and Company Reported Net Income for the Current Year

question 113

Multiple Choice

Smith and Company reported net income for the current year.Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income?

• A) Cash dividends were paid to stockholders during the year.
• B) Depreciation expense was recorded for the year.
• C) A bank loan was repaid during the year.
• D) Equipment was purchased for cash during the year.

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Definitions:

Variable Manufacturing

Costs in manufacturing that change in proportion to the volume of production, such as materials and labor.

Materials Price Variance

The difference between the actual cost of materials used in production and the budgeted cost of materials, based on standard prices and actual quantities purchased.

Variable Manufacturing

Costs in manufacturing that vary directly with the level of production, such as raw materials and direct labor costs.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to each unit of production, based on a certain activity level.