If a Company Uses the Indirect Method to Prepare the Statement

question 116

Multiple Choice

If a company uses the indirect method to prepare the statement of cash flows, which of the following items would be subtracted from net income in determining the net cash flow from operating activities?

• A)A loss on the sale of equipment would be subtracted from net income.
• B)An increase in dividends payable would be subtracted from net income.
• C)Amortization of a premium on bonds payable would be subtracted from net income.
• D)Depreciation expense would be subtracted from net income.

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Definitions:

Incentives

Factors that motivate individuals or businesses to act in a certain way, often used to encourage productivity and economic efficiency.

Renewable Resources

Those that are renewed in nature, like water flows, or grown, like timber.

Renewed

Pertains to something that has been restored, refreshed, or made new again.

Nature

The phenomena of the physical world collectively, including plants, animals, the landscape, and other features and products of the earth.