Using the Direct Method of Preparing the Statement of Cash

question 123

Multiple Choice

Using the direct method of preparing the statement of cash flows,to determine the cash effects of operating activities,a gain on the sale of equipment would be

• A)Added to operating expenses
• B)Deducted from payments for operating expenses
• C)Deducted from sales revenue
• D)Ignored because a gain is not a part of sales or operating expenses

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Definitions:

Total Revenue

Total revenue refers to the overall amount of money generated by a business from its sales activities before any expenses are subtracted.

Break-Even Point

An output at which a firm makes a normal profit (total revenue = total cost) but not an economic profit.

Total Revenue

The total income received by a firm from selling its goods or services, calculated as the quantity sold multiplied by the selling price per unit.

Short-Run Supply Curve

A supply curve that shows the quantity of a product a firm in a purely competitive industry will offer to sell at various prices in the short run; the portion of the firm’s short-run marginal cost curve that lies above its average-variable-cost curve.