The Indirect Method of Preparing the Operating Section of the Statement

question 17

Multiple Choice

The indirect method of preparing the operating section of the statement of cash flows:

• A)is the least popular method used.
• B)reports all cash receipts and cash payments from operating activities.
• C)reconciles net income to net cash provided by operating activities.
• D)reports different amounts for investing and financing activities than the direct method.

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Definitions:

Principal

The original sum of money borrowed in a loan or the initial amount of money invested, excluding any interest or gains.

Simple Interest

A method of calculating interest whereby it is applied only to the principal amount, not including any previously earned interest.

Deposit Maturity

The end of a deposit term at which point the deposited funds plus any accrued interest are available to the account holder.

Deposit Date

The specific day on which funds are placed into an account.