Which Method of Preparing the Operating Activities Section of a Statement

question 170

Multiple Choice

Which method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses?

• A) direct method
• B) indirect method
• C) balance sheet method
• D) retained earnings method

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is adjusted for the investor’s share of the investee’s profits and losses.

Equity Method Investments

Accounting for investments in other entities where the investor has significant influence over the investee but does not fully control or own it, typically between 20% and 50% ownership.

Common Stock

A type of security that represents ownership in a corporation and gives holders voting rights and a share in the company's profits through dividends.

Outstanding Stock

The shares of a corporation that have been issued and are in the hands of the public.