When Preparing a Statement of Cash Flows Using the Indirect

question 210

Multiple Choice

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

• A) A decrease in accounts payable.
• B) Proceeds from the disposal of a long-term asset with no gain or loss.
• C) An increase in accounts receivable.
• D) A decrease in accrued expenses payable.
• E) An increase in prepaid expenses.

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Definitions:

Ownership Rights

Legal rights that confer the possession, use, and transferability of a property or asset to its owner.

Market Participants

Entities or individuals that engage in the buying, selling, or exchange of goods and services in a particular market.

Maximize Utility

An economic principle that suggests individuals seek to obtain the highest level of satisfaction possible from their resources.

Maximize Benefits

Strategies or actions aimed at obtaining the greatest possible advantage or value from a situation, resource, or system.