Reliance Corporation Has Provided the Following Information for the Year

question 59

Multiple Choice

Reliance Corporation has provided the following information for the year ended December 31, 2016: • The equipment account balance increased $200,000.
• The equipment accumulated depreciation account balance increased $35,000.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
Which of the following statements is correct with respect to determining cash flow from operating activities?

• A)Using the indirect method, net income is increased by the $35,000 increase in the accumulated depreciation account balance.
• B)Using the indirect method, net income is decreased by the $30,000 sales price of the equipment.
• C)Using the indirect method, net income is increased by the $65,000 depreciation expense.
• D)Using the indirect method, net income is increased by the $10,000 gain on the sale of the equipment.

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Definitions:

Direct Materials Purchase Budget

A financial plan that estimates the raw materials required for production and their associated costs, aiding in financial and operational planning.

Ending Inventories

The total value of all unsold goods that a company has in stock at the end of an accounting period.

Direct Labor Budget

A financial plan that estimates the cost of direct labor needed to meet production goals, part of the overall budgeting process.

Direct Labor-Hour

A measure of the labor time directly involved in the manufacturing process or service delivery, often used in costing and budgeting.