Which of the Following Statements About the Reporting of Operating

question 131

Multiple Choice

Which of the following statements about the reporting of operating cash flows using the direct method is correct?

• A)Although most U.S.companies use the indirect method,the Financial Accounting Standards Board (FASB)prefers the direct method of accounting for cash flows from operating activities.
• B)The FASB prefers the indirect method of calculating cash flows from operating activities because it gives a more accurate calculation of cash provided by operating activities.
• C)The direct method results in a larger amount of cash flow from operating activities than does the indirect method.
• D)The direct and indirect methods use different presentations for cash flows from investing and financing activities.

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Definitions:

Complete Package

A product or deal that includes everything needed for a particular purpose or requirement, leaving nothing out.

Reasonable Basis

A standard which requires that claims, especially in law and finance, must have a foundation that is logically sound and justifiable.

Generalities

Statements or ideas that are broad and unspecific, lacking in detailed explanation or specificity.

Exaggerations

Statements that stretch the truth or overstate facts.