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:

Depreciation Expense

Depreciation Expense refers to the systematic allocation of the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Effective Tax Rate

The average rate at which an individual or corporation is taxed, calculated by dividing the total amount of tax by the taxable income.

Consolidated Balance Sheet

A financial statement that shows the combined assets, liabilities, and equity of a parent company and its subsidiaries.

Land

An asset representing the surface of the earth owned by an individual or organization, not including the buildings or resources above or below it.