When Preparing a the Operating Section of the Statement of Cash

question 83

Multiple Choice

When preparing a the operating section of the statement of cash flows using the indirect method,which of the following items are added to net income?

• A)decrease in accounts payable
• B)unrealized gains on trading securities
• C)loss on sale of equipment
• D)increase in merchandise inventory

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Definitions:

Estimated Overhead Cost

Estimated overhead cost refers to the projected expenses related to manufacturing overhead or indirect costs that are expected to be incurred over a specified period.

Predetermined Overhead Rates

A rate calculated prior to the accounting period that is used to apply manufacturing overhead costs to products or job orders, based on an estimated amount of allocation base.

Accounting Period

A specific period of time used for financial reporting and analysis, often a quarter or a year.

Estimates

Approximations used in accounting when precise data is unavailable, often used for calculating allowances for doubtful accounts or depreciation.