Salem,IncUses the Indirect Method to Prepare Its Statement of Cash

question 5

Multiple Choice

Salem,Inc.uses the indirect method to prepare its statement of cash flows.Salem's Accumulated Depreciation-Trucks account increased during the period.Salem did not purchase or sell trucks during the period.The increase in Accumulated Depreciation-Trucks is:

• A)subtracted from net income to determine net cash provided by operating activities.
• B)added to net income to determine net cash provided by operating activities.
• C)shown as a cash outflow on the investing activities section.
• D)shown as a cash outflow on the financing activities section.

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Definitions:

Standard Hours

The predetermined amount of time expected to complete a task or job under normal conditions.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or cost objects, calculated in advance based on estimated costs and activity levels.

Direct Labour Hours

The total number of hours worked by employees directly involved in the manufacturing process or providing a service.

Variable Manufacturing Overhead

Costs that vary with the level of production output, such as utilities or commissions, which are indirectly associated with the manufacturing of products.