Which of the Following Items About the Statement of Cash

question 10

Multiple Choice

Which of the following items about the statement of cash flows is correct?

• A)Noncash expenses such as depreciation are subtracted from net income when using the indirect method for computing cash flows from operating activities.
• B)Cash equivalents are highly liquid investments with maturities at the date of purchase of less than three months.
• C)The acquisition of land by issuing bonds payable would not appear on the statement of cash flows.
• D)Cash paid for interest would be classified as a financing cash flow.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value.

Present Obligation

A duty or responsibility that is expected to be settled in the future, recognized as a liability.

Past Event

An event or transaction that has occurred prior to the balance sheet date, impacting the financial position or performance of an entity.