Platt Company Prepares Its Statement of Cash Flows Using the Indirect

question 60

Essay

Platt Company prepares its statement of cash flows using the indirect method. Indicate whether each of the items below would be added to (+) or deducted from (-) net income to determine net cash flows from operating activities.
_____ 1. Decrease in Inventory
_____ 2. Decrease in Accounts Payable
_____ 3. Depreciation Expense
_____ 4. Loss on Disposal of Truck
_____ 5. Increase in Accounts Receivable
_____ 6. Increase in Wages Payable
_____ 7. Amortization Expense
_____ 8. Increase in Prepaid Rent
_____ 9. Gain on Sale of Land
_____ 10. Increase in Income Taxes Payable

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Definitions:

Worthless Cheque

A cheque that cannot be processed because the account it is drawn on does not have sufficient funds.

Innocent Purchaser

An individual who buys property without knowledge of any existing claims, liens, or encumbrances against it.

Consideration

The worth, including currency, services, or items, that is traded between entities in an agreement.

Contract Void

A contract void is a contract that is deemed legally nonexistent and unenforceable from the outset, due to illegality or other serious defects.