When Preparing the Statement of Cash Flows Using the Indirect

question 46

Multiple Choice

When preparing the statement of cash flows using the indirect method for determining net cash flows from operating activities, depreciation is added to net income because:

• A) It was deducted as an expense on the income statement, but does not require cash.
• B) It was deducted as an expense on the income statement and affects the amount of cash.
• C) It is a significant portion of the year's expenses.
• D) It represents a source or inflow of cash.

Identify and describe the terms and conditions of bond indentures.

Recognize the accounting treatment for various financial instruments, including derivatives and hedges, under current GAAP.

Understand the effects of interest payments frequency on the proceeds from bond issues and the valuation of bonds.

Comprehend the accounting for the early retirement of debt and the recognition of gains or losses in such transactions.

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Definitions:

First-in, First-out Method

An inventory valuation method where goods first received are the first ones sold, assuming that inventory costs rise over time.

Conversion Costs

The costs incurred to convert raw materials into finished products, including labor and overhead.

Cost of Production

The total expense incurred in manufacturing a product or providing a service, including raw materials, labor, and overheads.

Transferred-in Costs

Costs accumulated from previous departments or processes that are carried forward into the cost of new products or stages of production.