Which of the Following Transactions or Events Should Be Reported

question 50

Multiple Choice

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

• A)Credit sales.
• B)Cash collections from customers.
• C)Depreciation expense.
• D)Cash received from the sale of a building.
• E)Cash received from the sale of treasury stock.

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Definitions:

Capital Balances

The amounts shown in a company's financial statements under shareholders' equity, representing the residual interests in the assets of the entity after deducting liabilities.

Goodwill Method

An accounting method used to evaluate the excess of purchase price over the fair value of net identifiable assets acquired in a business combination.

Journal Entries

Recorded transactions in the accounting records of a business that are used to transfer amounts from one account to another, ensuring the ledger remains in balance.

Fair Value

Fair value is an estimate of the market value of an asset, based on its current price in a fair and open market transaction.