When Preparing a Statement of Cash Flows on the Indirect

question 99

Multiple Choice

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

• A) Proceeds from the sale of equipment should be added to income in the operating activities section.
• B) A loss on the sale of land should be added to 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 bonus issue or share 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:

Master Budgeting

A comprehensive financial planning document that encompasses all of a company’s budgets, including sales, production, and financial budgets.

Cash Budget

A cash budget is a financial plan that estimates cash inflows and outflows over a specific period, often used by businesses to manage liquidity and ensure they have enough cash to meet obligations.

Budgeted Financial Statements

Financial statements projected for a future period, based on estimates of revenues, expenses, and other financial activities.

Operating Budgets

Detailed projections of income and expenses associated with the day-to-day operations of a business over a certain period.