Gannon Corporation Uses the Indirect Method to Prepare Its Statement

question 4

Multiple Choice

Gannon Corporation uses the indirect method to prepare its statement of cash flows.Following this approach,a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities.The most likely reason for this adjustment is that:

• A)The sale of equipment did not result in the receipt of any cash by Gannon Corporation.
• B)The sale resulted in a cash receipt in an accounting period different from the period in which the gain was recognized.
• C)The amount of the gain recognized was not equal to the cash received.
• D)This type of transaction is not classified as an operating activity.

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Definitions:

Strategic Objective

A long-term goal that an organization seeks to achieve, which is designed to guide its direction and help it secure a competitive advantage.

Failures of Process

Situations where planned processes do not achieve their goals, leading to inefficiency, loss, or other negative outcomes.

Lack of Participation

The situation where members of a group or community do not engage or contribute to activities or discussions.

Failures of Process

Situations where a process does not achieve its intended outcome, leading to inefficiency or errors.