On the Statement of Cash Flows Prepared Using the Indirect

question 158

Multiple Choice

On the statement of cash flows prepared using the indirect method, a $7,500 gain on the sale of fixed assets would be

• A) added to net income in converting the net income reported on the income statement to cash flows from operating activities
• B) deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
• C) added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
• D) deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

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Definitions:

Loanable Funds

The total funds available from savers for borrowing in the financial markets, used for investments, purchasing goods, or other purposes.

Private Investment

Spending by businesses or individuals on capital goods, such as factories, machinery, and homes, which is used to produce goods or services.

Demand For Loanable Funds

The total quantity of loans that borrowers are willing to take out at various interest rates, holding all else equal.

Equilibrium Interest Rate

The interest rate at which the quantity of loanable funds demanded equals the quantity supplied, leading to a balance in the money market.