Under the Indirect Method, Which of the Following Items Would

question 81

Multiple Choice

Under the indirect method, which of the following items would be added to net income to determine the cash flow from operating activities?

• A)Gain on the sale of equipment.
• B)Decrease in the balance of accounts payable.
• C)Accrued interest receivable.
• D)Depreciation expense.

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Definitions:

Market Rate of Interest

The interest rate prevailing in the market for securities of similar risk and maturity.

Amortization

The gradual reduction of a debt over a period of time through regular payments that cover interest and principal.

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as the original cost minus any depreciation, amortization, or impairment costs.

Effective Interest Method

A method of calculating the amortized cost of a financial asset or liability and allocating the interest income or expense over the relevant period.