In Preparing a Statement of Cash Flows Under the Indirect

question 128

Multiple Choice

In preparing a statement of cash flows under the indirect method,an increase in accounts payable would be reported as a(n) :

• A)Addition to net income in the operating activities section.
• B)Deduction from net income in the operating activities section.
• C)Financing activity.
• D)Investing activity.

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Definitions:

Effective Interest Rate

Represents the real cost of borrowing or the real yield on an investment, accounting for compounding periods within a year.

Annual Payments

Regular payments made once per year towards the principal and/or interest of a loan or financial obligation.

Nominal Rate

The interest rate stated on a loan or investment agreement, not accounting for inflation or compounding effects.

Semi-Annual Payments

Payments made twice a year, often used in the context of loan repayments or bond interest payments.