Which of the Following Items Is Added to Net Income

question 55

Multiple Choice

Which of the following items is added to net income when using the indirect method of calculating cash flows provided by operating activities?

• A)An increase in accounts payable
• B)An increase in prepaid expenses
• C)A decrease in accrued revenues
• D)A decrease in taxes payable

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Definitions:

Fixed Maintenance Cost

The portion of total maintenance costs that does not fluctuate with changes in activity level or output.

Machine-Hours

The total hours that a machine is operated over a specific period of time, used in allocating manufacturing costs.

Relevant Range

The scope of operations in which the beliefs regarding constant and fluctuating cost patterns hold true.

Cost Formula

An equation used to predict the total costs associated with a certain level of activity or production volume.