The Comparative Balance Sheets of Midnite Corp

question 106

Multiple Choice

The comparative balance sheets of Midnite Corp.for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018.How will this change be reported on Midnite's statement of cash flows,if Midnite uses the indirect method?

• A)It will be included in the amount of cash and cash equivalents at the end of 2018.
• B)It will be reported as a deduction from net income in the Operating Activities section.
• C)It will be reported as a cash outflow in the Investing Activities section.
• D)It will be added to net income in the Operating Activities section.

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Definitions:

Parking

The act of stopping and disengaging a vehicle and leaving it unoccupied.

Implicit Costs

Additional costs that do not appear on the financial statements of a company. These costs include items such as the opportunity cost of capital.

Economic Profits

Profits that exceed the opportunity costs of all resources used by the firm, including both explicit and implicit costs.

Sunk Costs

Costs that cannot be recovered. They are unavoidable even in the long run.