Using the Direct Method of Preparing the Statement of Cash

question 152

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:

Long-term Debt

Financial obligations of a company or individual that are due after a period of one year or more.

Trade Credit

Debt arising from credit sales and recorded as an account receivable by the seller and as an account payable by the buyer.

Discounts

A reduction from the usual cost of something, often applied to prompt payment or to certain categories of customers.

Increase

A rise in value, quantity, or some other measure.