The Indirect Method of Preparing the Statement of Cash Flows

question 107

Multiple Choice

The indirect method of preparing the statement of cash flows

• A)is seldom used by companies because of the extra effort required to gather cash flow information.
• B)calculates only the cash effect of each operating activity.
• C)is the method preferred by the FASB.
• D)begins with net income,adds back non cash expenses,and adjusts for changes in the current asset and current liability accounts.
• E)can be used to determine cash flows from operating,investing,and financing activities.

---

Definitions:

Direct Materials

Direct materials are raw materials that are directly used in the production of a product and are an integral part of the finished product.