Using the Direct Method of Preparing the Statement of Cash

question 99

Multiple Choice

Using the direct method of preparing the statement of cash flows, to determine the cash effects of operating activities, a gain on the sale of equipment is

• A)added to operating expenses.
• B)deducted from payments for operating expenses.
• C)deducted from sales revenue.
• D)ignored because a gain is not a cash flow.

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Definitions:

Tenant in Common

A tenant in common is an individual who co-owns property with one or more persons, where each owner possesses an undivided interest and no right of survivorship exists among the owners.

Tenancy by the Entirety

A form of joint property ownership available only to married couples where both own the entire property equally and rights of survivorship apply.

Rents and Profits

The income achieved from leasing real estate or other properties, and the gains derived from their operation.

Lease Agreement

A legal contract between a lessor and lessee that outlines the terms and conditions under which a property is rented.