Assuming the Use of the Indirect Method to Prepare the Statement

question 95

Essay

Assuming the use of the indirect method to prepare the statement of cash flows,indicate whether each of the following items would be added to net income,subtracted from net income,or not included in the operating activities section.Use the letters "A" for added,"S" for subtracted,or "N" for not included in the operating activities section.
$$\begin{array} { | l | l | c | } \hline & & \text { Answers } \\\hline \text { a. } & \text { Example: Increase In Accounts Receivable } & \text { S } \\\hline \text { b. } & \text { Decrease in Accounts Payable } & \\\hline \text { c. } & \text { Decrease in Bond Payable } & \\\hline \text { d. } & \text { Decrease in Inventory } & \\\hline \text { e. } & \text { Increase in Common Stock } & \\\hline \text { f. } & \text { Decrease in Accounts Receivable } & \\\hline \text { g. } & \text { Depreciation Expense } & \\\hline \text { h. } & \text { Decrease in Equipment } & \\\hline \text { i. } & \text { Decrease in Prepaid Rent } & \\\hline\end{array}$$

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Definitions:

Financial Statements

Formal records of the financial activities and condition of a business, entity, or individual.

FIFO

First-In, First-Out, an inventory valuation method where goods first bought are the first ones sold.

Input Cost Changes

Refers to variations in the cost of materials or labor that are used in the production of goods or services.

Inventory Turnover

Inventory turnover is a ratio showing how many times a company has sold and replaced its inventory over a specific period. It measures the efficiency of inventory management.