Which of the Following Would Be Added to Net Income

question 16

Multiple Choice

Which of the following would be added to net income on a statement of cash flows prepared using the indirect method?

• A) A gain from the sale of equipment
• B) A decrease in accounts receivable
• C) A decrease in accounts payable
• D) Dividends received

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Definitions:

Indirect Method

A financial reporting approach used in cash flow statements to reconcile net income with cash flow from operating activities by adjusting for non-cash transactions.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, representing the premium paid over the fair value of the net identifiable assets.

Voting Stock

Shares that give the stockholder the right to vote on matters of corporate policy making and the election of the board of directors.

Fair Value

The price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.