In the Preparation of a Statement of Cash Flows, Adjustments

question 123

Multiple Choice

In the preparation of a statement of cash flows, adjustments to net income to reconcile net income to cash from operating activities include

• A)dividends received.
• B)the difference between the purchase price and the resale price of treasury stock (assuming the cost method of accounting for treasury stock).
• C)amortization of organization cost.
• D)redemption premium on preferred stock redeemed during the period.
• E)All of these answer choices are correct.

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Definitions:

Fair Market Value

The price at which an asset would sell under normal market conditions, reflecting the value between willing buyers and sellers.

Operating Policies

Guidelines and regulations formulated by an organization to govern its operational activities and decision-making.

50% Interest

Ownership interest that represents half of the equity capital or voting power in an entity or investment.

Voting Stock

Shares that give the shareholder the right to vote on corporate matters, such as electing the board of directors.