Shaw Associates Uses the Indirect Method for Preparing the Statement

question 96

Multiple Choice

Shaw Associates uses the indirect method for preparing the statement of cash flows. The following accounts and balances were drawn from the company's accounting records: Net income for the period was $42,000. The net cash flows from operating activities equals:
$$\begin{array} { | l | r r | r r | } \hline \text { Account Title } &{ \text { Begining } } &&{ \text { Ending } } \\\hline \text { Accounts receivable } & \$ & 30,000 & \$ & 40,000 \\\hline \text { Prepaid insurance } & \$ & 4,600 & \$ & 1,000 \\\hline \text { Accounts payable } & \$ & 24,000 & \$ & 25,800 \\\hline \text { Unearned revenue } & \$ & 6,400 & \$ & 3,800 \\\hline\end{array}$$

• A)$37,200.
• B)$34,800.
• C)$49,200.
• D)$40,000.

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Definitions:

Risk-averse

A characteristic of preferring to avoid loss over making a gain, typically by selecting the option with the smallest possible risk.

Expected Utility

A theory in economics that quantifies how choices are made when the outcomes are uncertain.

Utility

A measure of satisfaction or pleasure that individuals get from the consumption of goods and services.

Risk Premium

The extra return expected by investors for holding a risky asset over a risk-free one, serving as compensation for the additional risk.