When Preparing the Statement of Cash Flows by the Indirect

question 48

Multiple Choice

When preparing the statement of cash flows by the indirect method,if accumulated depreciation increases the difference is:

• A)added to net income.
• B)added to investments.
• C)deducted from net income.
• D)not considered in the statement of cash flows using the indirect method.

---

Definitions:

Fixed Costs

Costs that do not change with the level of production or sales, such as rent and insurance.

Break-even Sales

The amount of revenue needed to cover both fixed and variable costs, resulting in zero net income or loss.

Variable Costs

Expenses that change in proportion to the activity or volume of production or sales, such as raw materials and direct labor.

Break-even Point

The point at which total revenues equal total expenses, indicating that a business is neither making a profit nor incurring a loss.