Under the Indirect Method,which of the Following Is NOT a Proper

question 89

Multiple Choice

Under the indirect method,which of the following is NOT a proper adjustment to net income under operating activities?

• A)Adding a decrease in inventory
• B)Subtracting an increase in salaries payable
• C)Deducting an increase in prepaid expenses
• D)Subtracting a gain on the sale of equipment

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly involved in creating the product.

Cash Dividends

Payments made by a corporation to its shareholder members out of its earnings. It represents a share of corporate profits.

Property, Plant, Equipment

Long-term tangible assets used in the operation of a business and not intended for resale.

Operating Activities

Operating activities relate to the primary business activities of a company, such as production, distribution, and marketing, which generate revenue and expenses reflected in the income statement.