For Each of the Following Items, Indicate by Using the Appropriate

question 109

Multiple Choice

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Proceeds from sale of equipment at book value.

• A)Added to net income
• B)Deducted from net income
• C)Cash outflow--investing activity
• D)Cash inflow--investing activity
• E)Cash outflow--financing activity
• F)Cash inflow--financing activity
• G)significant noncash investing and financing activity

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Definitions:

Implicit Lease Rate

The interest rate assumed in the lease contract that equates the present value of the lease payments and any unguaranteed residual value to the fair value of the asset.

Capitalization

The process of recording an expenditure as an asset on the balance sheet, rather than an expense, allowing its cost to be expensed over time.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Return On Equity

A measure of a corporation's profitability that calculates how much profit a company generates with the money shareholders have invested.