Assume the Indirect Method Is Used to Compute Net Cash

question 17

Multiple Choice

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Income Taxes Payable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

• A)Add to net income to arrive at net cash flows from operating activities.
• B)Subtract from net income to arrive at net cash flows from operating activities.
• C)Not used to adjust net income to calculate net cash flows from operating activities.

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Definitions:

Dividend Payable

A liability recorded on a company's balance sheet for dividends that have been declared but not yet paid to shareholders.

Dividend Receivable

The amount due to shareholders from declared dividends by the company in which they hold shares, recognized as an asset on the balance sheet until paid.

Elimination

The process of removing intercompany transactions when consolidating financial statements of a group.

Consolidation

The process of combining the financial statements of multiple subsidiaries with those of the parent company to present as a single entity.