At the Beginning of 2009, Baldwin Corporation Bought an Automobile

question 26

Multiple Choice

At the beginning of 2009, Baldwin Corporation bought an automobile for $36,000 by issuing a note payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2009 using the indirect method, net income should be:

• A) Increased by $6,000.
• B) Decreased by $6,000.
• C) Increased by $42,000.
• D) Neither increased nor decreased. No adjustments are necessary since no cash was received or paiD.$36,000/6 = $6,000

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Definitions:

Operating Revenues

Income generated from the core business activities of an entity excluding non-operating income sources.

Remeasurement

The process of converting foreign currency amounts into a functional currency using exchange rates that reflect changes in market conditions.

Translation

The process of converting the financial statements of a foreign subsidiary into the reporting currency of the parent company, according to appropriate accounting standards.

Purpose

The underlying motive or reason for the creation or existence of something.