When Preparing the Statement of Cash Flow Using the Indirect

question 87

Multiple Choice

When preparing the statement of cash flow using the indirect method,Depreciation Expense is:

• A)added back to net income under the operating activities section.
• B)subtracted from net income under the operating activities section.
• C)subtracted net income under the financing activities section.
• D)added back to net income under the financing activities section.

Comprehend the transition from the adjusted trial balance to financial statements.

Classify assets correctly between current and non-current (plant, property, equipment).

Distinguish between current liabilities and other types of liabilities.

Define current assets and their characteristics.

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Definitions:

Implicit Interest Rate

The interest rate implied in the lease payments of a leasing agreement, used in lease accounting to determine lease liabilities and right-of-use assets.

Residual Guarantee

A guarantee made by the seller to the buyer that the value of an asset will at least be equal to a specified amount at the end of a lease term.

Lease Payment

Regular payments made by a lessee to a lessor for the use of an asset for a specified period as outlined in a lease agreement.

Lease Payment

Payments made by a lessee to a lessor for the use of a leased asset, typically defined in the lease agreement and paid over the lease term.