Under the Direct Method of Preparing the Statement of Cash

question 119

Multiple Choice

Under the direct method of preparing the statement of cash flows,all of the following would be reported under operating activities EXCEPT:

• A)collections from customers.
• B)interest received on notes receivable.
• C)dividends received on investments in stock.
• D)cash proceeds on sale of long-term investments.

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Definitions:

Preferred Stock

Type of stock that provides dividends before common stock and carries no voting rights, offering a higher claim on assets and earnings.

Par Value

The nominal or face value of a bond, stock, or coupon as stated in the financial instrument, which is a significant figure for calculating interest payments or dividends.

Par Value

The nominal or face value of a stock or bond as stated by the issuing company, often used in the context of bonds.

Preferred Stock

A class of ownership in a corporation with a specified dividend that must be paid before dividends to common stockholders.