When Preparing a Statement of Cash Flows Using the Indirect

question 48

Multiple Choice

When preparing a statement of cash flows using the indirect method,which of the following is correct?

• A)Proceeds from the sale of equipment should be added to net income in the operating activities section.
• B)A loss on the sale of land should be added to net income in the operating activities section.
• C)The declaration of a cash dividend should be a use of cash in the financing activities section.
• D)The issuance of a stock dividend should be a use of cash in the financing activities section.
• E)The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section.

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Definitions:

Compounded Quarterly

The process of calculating interest on both the initial principal and accumulated interest over four periods within a year.

Economically Equivalent

A term describing financial items or situations that have the same value or effect when all factors are considered.

Scheduled Payment

A predetermined amount paid at regular intervals under the terms of a loan agreement.

Compounded Semi-annually

An interest calculation method where interest is added to the principal sum twice a year, affecting the total interest earned.