In Preparing a Statement of Cash Flows Using the Indirect

question 12

Multiple Choice

In preparing a statement of cash flows using the indirect method, an increase in an unearned revenue account should

• A) be shown as a financing activity.
• B) be shown as a deduction from net income in computing net cash flows from operating activities.
• C) not be shown on the statement of cash flows.
• D) be shown as an addition to net income in computing net cash flows from operating activities.

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Definitions:

Corporate Tax System

The structure by which businesses are taxed by the government on their profits, incorporating varying rates and regulations depending on the country or jurisdiction.

Targeted Rates

Interest rates or inflation rates that central banks aim for to control economic variables like inflation and unemployment.

Tax System

The organized structure and set of rules under which taxes are collected by a government from individuals and businesses.

Incentivize

Incentivize refers to the practice of offering rewards or incentives to encourage certain behaviors or actions.