When Using the Indirect Method to Prepare the Operating Activities

question 66

Multiple Choice

When using the indirect method to prepare the operating activities section of the statement of cash flows,how is a decrease in current liabilities handled?

• A)It is subtracted from net income in the cash flows from operating activities section.
• B)It is subtracted from current assets in the cash flows from financing activities section.
• C)It is added to net income in the cash flows from operating activities section.
• D)It is added to inventory purchases in the cash flows from investing activities section.

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Definitions:

Acid Derivative

A compound obtained by replacing one or more of the hydroxyl groups of an acid with an organic group.

Anhydride

A compound formed from the removal of water molecules between two carboxylic acid molecules.

Organic Product

A compound or material derived from living organisms or produced by organic chemical reactions.

Reaction

A transformation process where reactants are converted into different substances known as products.