Which of the Following Should Be Deducted from Net Income

question 177

Multiple Choice

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

• A) a decrease in inventory
• B) a decrease in accounts payable
• C) preferred dividends declared and paid
• D) a decrease in accounts receivable

---

Definitions:

Consolidated Balance Sheet

A consolidated balance sheet combines the financial statements of a parent company and its subsidiaries into a single document, showing the total assets, liabilities, and equity of the consolidated entity.

Fair Value

The estimated market price of an asset or liability, reflecting what a willing buyer would pay a willing seller in an arm's length transaction.

Useful Life

Useful Life is the estimated period that an asset is expected to be productive or provide benefits to a business, determining its depreciation or amortization schedules.

Goodwill Recognition

The process of accounting for the excess of purchase price over the fair value of identifiable assets and liabilities of an acquired entity.