If the Indirect Method Is Used to Prepare a Statement

question 96

Multiple Choice

If the indirect method is used to prepare a statement of cash flows, which of the following would be deducted from net income to arrive at net cash flows from operating activities?

• A) Increase in accrued liabilities
• B) Increase in income taxes payable
• C) Increase in accounts receivable
• D) Decrease in prepaid expenses

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Definitions:

Gratuitous Agent

An agent who acts on behalf of another without receiving any compensation.

Consideration

A fundamental element of a contract, referring to something of value exchanged between parties, such as services, goods, or money.

Contractual Capacity

The legal ability to enter into a binding agreement.

Agency Relationship

represents a legal arrangement where one party, the agent, acts on behalf of another party, the principal, in dealing with third parties.