The Direct Method for the Preparation of the Operating Activities

question 214

Multiple Choice

The direct method for the preparation of the operating activities section of the statement of cash flows:

• A) Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement.
• B) Is required by the FASB.
• C) Reports a different amount of cash flows from operations than if the indirect method is used.
• D) Separately lists each major item of operating cash receipts and cash payments.
• E) Is required if the company is a merchandiser.

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Definitions:

Pulmonary Trunk

A major vessel that emerges from the right ventricle of the heart and bifurcates into the right and left pulmonary arteries, which carry blood to the lungs.

Right Ventricle

The chamber of the heart that receives deoxygenated blood from the right atrium and pumps it to the lungs through the pulmonary artery.

Coronary Artery

Coronary arteries are blood vessels that supply oxygen-rich blood to the heart muscle, crucial for heart function and health.

Abdominal Aorta

The major blood vessel that runs from the heart through the center of the chest and abdomen, supplying oxygenated blood to the abdominal and pelvic organs and the legs.