When Preparing a Statement of Cash Flows on the Indirect

question 117

Multiple Choice

When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except:

• A) An increase in accounts receivable.
• B) A decrease in accounts payable.
• C) A gain from disposal of a long-term asset
• D) An increase in prepaid expenses.
• E) A decrease in accrued expenses payable.

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Definitions:

Voluntary Export Restraint

A self-imposed limitation by exporting countries on the volume of their exports of a particular good.

Subsidy

A financial contribution granted by a government or another entity to support an industry, business, or individual, usually intended to keep prices low, support an essential service, or encourage activities beneficial to the public interest.

Tariff

A tax imposed on imported goods to either raise state revenue or protect domestic industries from foreign competition.

Quota

A government-imposed limit on the amount or value of goods that can be imported or exported during a specified time period, often used to protect domestic industries.