When Using the Indirect Method to Determine Operating Cash Flows

question 54

Multiple Choice

When using the indirect method to determine operating cash flows, how would the declaration and payment of cash dividends be shown on the Statement of Cash Flows?

• A)operating activities
• B)investing activities
• C)financing activities
• D)noncash investing and financing activity
• E)not reported on the statement of cash flows.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate overhead costs to products or job orders based on a specific activity base such as direct labor hours or machine hours.

Machine-Hours

The total hours that machinery is operating in the production process, often used as a basis for allocating costs to products.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before the production period based on an estimation of costs and activity levels.

Machine-Hours

A unit of measure representing the operation of machinery over time, typically used for allocating manufacturing overhead costs.