If a Company Uses the Indirect Method to Prepare the Statement

question 40

Multiple Choice

If a company uses the indirect method to prepare the statement of cash flows, how will the adjustment to reflect the amount of cash paid for interest be presented on the statement of cash flows?

• A)The adjustment will be for the increase or decrease in accounts receivable during the period and will adjust net income in the operating activities section in the statement of cash flows.
• B)The adjustment will be for to reflect the increase or decrease in inventory during the period and will adjust net income in the operating activities section in the statement of cash flows.
• C)The adjustment will be for the increase or decrease in accounts payable during the period and will adjust net income in the operating activities section in the statement of cash flows.
• D)The adjustment will be for the increase or decrease in interest payable during the period and will adjust net income in the operating activities section in the statement of cash flows.

---

Definitions:

Mechanization

The process of introducing machines or automated equipment into manufacturing, agriculture, or other sectors to increase efficiency and production.

Rationalization

The process of replacing traditional and emotional thought with reason and practicality, often in reference to work processes or societal norms.

Moral Society

A community or society that abides by a set of moral principles or standards governing the behavior of its members.

Power Imbalances

Situations where there is an unequal distribution of power among individuals or groups, leading to dominance and subordination.