Which of the Following Constitutes an Implicit Cost to the Johnston

question 152

Multiple Choice

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

• A) Payments of wages to its office workers
• B) Rent paid for the use of equipment owned by the Schultz Machinery Company
• C) Depreciation charges on company-owned equipment
• D) Economic profits resulting from current production

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Definitions:

Indirect Method

A cash flow statement reporting approach that starts with net income then adjusts for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Operating Activities

Business actions directly related to the production and delivery of goods and services.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments, as reported in a company's statement of cash flows.

Noncash Investing

Transactions that involve the acquisition or disposal of non-cash assets, such as property, plant, and equipment, through means other than cash payments.