When Using the Indirect Method,a Decrease in a Current Asset

question 73

Multiple Choice

When using the indirect method,a decrease in a current asset (other than cash or cash equivalents) is:

• A) subtracted from current liabilities in the cash flows from financing activities section.
• B) subtracted from net income in the cash flows from operating activities section.
• C) added to net income in the cash flows from operating activities section.
• D) added in the cash flows from investing activities section.

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Definitions:

Period of a Note

The duration of time from when a promissory note is issued until it is due for repayment.

Contract Date

The specific date on which a contract is signed or becomes enforceable.

Maturity Date

The final payment date of a loan or financial instrument, at which point the principal (and all remaining interest) must be paid.

Notes Receivable

Claims against others, recorded by an entity, that are evidenced by promissory notes, indicating the others’ promises to pay specified amounts at predetermined dates.