A Company Uses the Indirect Method to Prepare the Statement

question 99

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows. Which of the following items would be subtracted from net income to determine the net cash flow from operating activities on the statement of cash flows?

• A)An increase in dividends payable would be subtracted from net income to determine the net cash flow from operating activities in the statement of cash flows.
• B)A loss on the sale of equipment would be subtracted from net income to determine the net cash flow from operating activities in the statement of cash flows.
• C)A gain on the sale of equipment would be subtracted from net income to determine the net cash flow from operating activities in the statement of cash flows.
• D)Depreciation expense would be subtracted from net income to determine the net cash flow from operating activities in the statement of cash flows.

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Definitions:

Damages

Monetary compensation awarded by a court to a person who has suffered loss or harm due to the wrongful act of another.

Expenses Incurred

Costs that have been recognized or are payable due to business activities or transactions.

Breach Of Contract

The violation of any of the agreed-upon terms and conditions of a binding contract.

Special Damages

Compensatory damages that cover specific, quantifiable financial losses suffered by a plaintiff, such as medical bills or lost wages, due to the defendant's wrongdoing.