When Using the Indirect Method for Preparing the Statement of Cash

question 83

Multiple Choice

When using the indirect method for preparing the statement of cash flows,all of the following will appear in the Operating Activities section except

• A)an increase in deferred tax.
• B)depreciation expense on leased assets.
• C)interest expense.
• D)an increase in long-term liabilities.

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Definitions:

Relevant Costs

Expenses directly tied to a specific business decision, which should be considered when making that decision.

Incremental Revenues

Additional income that is generated by increasing sales activities or by introducing new products or services.

Special Order

A customer order for a product or service that is not normally produced or offered, often requiring unique specifications.

Fixed Overhead

The costs associated with running a business that do not vary with the level of production or sales, such as rent, salaries, and insurance.