An extract from a statement of cash flows prepared by a trainee accountant of Doc Jill Company is shown below: CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P28,000,000 Adjustments for: Depreciation _(2,000,000) Operating income before working capital changes 19,000,000 Decrease in inventories 13,000,000 Increase in accounts receivable (4,000,000) Increase in accounts payable (8,000,000) Net cash generated from operations P10,000,000 Which of the following criticisms of this extract are correct? 1. Depreciation charges should have been added, not deducted. 2. Decrease in inventories should have been deducted, not added. 3. Increase in receivables should have been added, not deducted. 4. Increase in payables should have been added, not deducted. O1 and 4 O1 and 3 O2 and 4 O 2 and 3

An extract from a statement of cash flows prepared by a trainee accountant of Doc Jill Company is shown below: CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P28,000,000 Adjustments for: Depreciation _(2,000,000) Operating income before working capital changes 19,000,000 Decrease in inventories 13,000,000 Increase in accounts receivable (4,000,000) Increase in accounts payable (8,000,000) Net cash generated from operations P10,000,000 Which of the following criticisms of this extract are correct? 1. Depreciation charges should have been added, not deducted. 2. Decrease in inventories should have been deducted, not added. 3. Increase in receivables should have been added, not deducted. 4. Increase in payables should have been added, not deducted. O1 and 4 O1 and 3 O2 and 4 O 2 and 3

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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