When Using the Indirect Method to Prepare the Statement of Cash

question 2

Multiple Choice

When using the indirect method to prepare the statement of cash flows, a decrease in current liabilities is:

• A)subtracted from current assets in the cash flows from financing activities section.
• B)subtracted from net income in the cash flows from operating activities section.
• C)added to net income in the cash flows from operating activities section.
• D)added to inventory purchases in the cash flows from investing activities section.

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Definitions:

Strategic Level

A high-level perspective in organizational planning that focuses on long-term goals and overall direction of an organization.

Mixed Cost

Expenses that have both fixed and variable components, changing with the level of activity but not directly proportional.

Variable Costs

are expenses that change in proportion to the activity of a business, such as the cost of raw materials used in production.

Differential Costs

The difference in total cost that will result from selecting one alternative over another.