Which of the Following Statements Is Incorrect Regarding the Use

question 69

Multiple Choice

Which of the following statements is incorrect regarding the use of the indirect method when preparing the operating activities of the statement of cash flows?

• A) A decrease in accounts payableAccounts Payable is deducted from net income
• B) A decrease in prepaid insurancePrepaid Insurance is added to net income
• C) Gain on the retirement of bonds is deducted from net income
• D) Depreciation expense is subtracted from net income

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Definitions:

Yield to Maturity

Yield to maturity is the total return anticipated on a bond if it is held until it matures, including all interest payments and any gain or loss if the bond was purchased at a discount or premium to its face value.

Semiannually

Semiannually refers to an occurrence that happens twice a year, typically at six-month intervals.

Yield to Maturity

The total return anticipated on a bond if it is held until the date it matures.

Annual Coupon

The annual interest payment received by bondholders, expressed as a percentage of the bond's face value.