In a Statement of Cash Flows Using the Indirect Method,an

question 32

Multiple Choice

In a statement of cash flows using the indirect method,an increase in available-for-sale securities not due to an increase in their fair value should be reported as:

• A)A deduction from net income in determining cash flows from operating activities.
• B)An addition to net income in determining cash flows from operating activities.
• C)A net cash outflow from investing activity.
• D)A net cash inflow from investing activity.

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Definitions:

Balance Sheet Accounts

Balance Sheet Accounts represent the accounts that are reported on the balance sheet and include assets, liabilities, and shareholders' equity accounts.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred, ensuring compliance with the accrual basis of accounting.

Time Period Assumption

An assumption that accountants can divide the economic life of a business into artificial time periods.

Economic Life

The expected period over which an asset remains useful to its owner or contributes to an enterprise's cash flows.