On a Statement of Cash Flows Using the Indirect Format,an

question 63

Multiple Choice

On a statement of cash flows using the indirect format,an increase in prepaid insurance is:

• A)ignored,since it is a noncash expenditure
• B)added to net income in the operating activities section
• C)included as an inflow in the financing activities section
• D)deducted from net income in the operating activities section

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Definitions:

Owner's Equity

The residual interest in the assets of an entity that remains after deducting its liabilities, reflecting the ownership interest in the company.

Cash

Currency and other liquid instruments that are used to conduct transactions or settle debts.

Accounts Receivable

Funds that customers owe to a company for products or services already provided but not yet compensated for.

Accounts Payable

A bookkeeping record indicating a business's duty to settle a short-term financial debt with its lenders or vendors.