The Amortization of Patents Should Be Presented in a Statement

question 19

Multiple Choice

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

• A) inflow and outflow of cash.
• B) outflow of cash.
• C) addition to net income in the adjustments to reconcile net income to cash from operating activities.
• D) deduction from net income in the adjustments to reconcile net income to cash from operating activities.

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Definitions:

Net Present Value (NPV)

Net Present Value is the difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Present Value

The worth at present of future monetary sums or cash flow streams, evaluated with a preset rate of return.

Cash Flows

The sum of funds flowing in and out of a company, particularly as it influences liquidity.

Capital Budgeting Project

A process of evaluating and selecting long-term investments that are expected to generate revenues or reduce costs, aiding in a firm's strategic planning.