Which of the following statements regarding the operating activities section of the statement of cash flows is true? O When using the indirect method, the adjustment for depreciation expense equals the sum of the debits to the Accumulated Depreciation account. O When using the indirect method, a loss on the sale of old Property, Plant, and Equipment is subtracted from net income. O When using the direct method, an increase in the Accounts Receivable account is added to sales revenue to compute cash collected from customers. O When using the indirect method, an increase in the Property, Plant and Equipment account is subtracted from net income. O When using the direct method, an increase in the Prepaid Auto Insurance Expense account is added to operating expenses to compute cash paid for operating expenses.

Which of the following statements regarding the operating activities section of the statement of cash flows is true? O When using the indirect method, the adjustment for depreciation expense equals the sum of the debits to the Accumulated Depreciation account. O When using the indirect method, a loss on the sale of old Property, Plant, and Equipment is subtracted from net income. O When using the direct method, an increase in the Accounts Receivable account is added to sales revenue to compute cash collected from customers. O When using the indirect method, an increase in the Property, Plant and Equipment account is subtracted from net income. O When using the direct method, an increase in the Prepaid Auto Insurance Expense account is added to operating expenses to compute cash paid for operating expenses.

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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Calculate the operating cash flow for Initech. (Assume that depreciation is tax deductible.) Initech Corp. Income Statement ($000's) Revenue Cost of Goods Sold SG&A Depreciation Expense. EBIT Interest Expense Income Before Taxes Taxes Net Income: $100,000 64,798 16,202 4,739 14,260 7,230 7,030 2,108 $4,922
(Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, an increase in Depreciation Expense is a.subtracted from operating expenses. b.subtracted from net income. c.added to net income. d.added to operating expenses.
18. When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted from net income to compute cash provided by/used by operating activities? Decrease in accounts receivable. Gain on sale of land. Amortization of patent. All of these are deducted from net income to arrive at cash flow from operating activities.
Required Information [The following information applies to the questions displayed below.] The following financial statements and additional information are reported. Assets Cash At December 31 Comparative Balance Sheets Accounts receivable, net Inventory Prepaid expenses Total current assets Machinery Accumulated depreciation-Machinery Total assets Liabilities Accounts payable Salaries payable Income taxes payable Total current liabilities Notes payable (long term) Total liabilities Equity Common stock, no par value Retained earnings Total liabilities and equity Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Year 2 $ 96,100 93,500 82,800 6,300 278,708 143,000 (36,500) $ 385,200 Income Statement For Year Ended December 31, Year 2 Other gains (losses) Gain on sale of machinery Income before taxes Income taxes expense Net income. $ 44,000 7,900 5,300 57,299 49,000 106,200 258,000 21,000 $385,200 Year 1 $ 63,000 70,000 115,000 9,200…
Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in a. the Cash flows from financing activities section b. a separate schedule c. the Cash flows from investing activities section d. the Cash flows from operating activities section
26.A gain on the sale of a plant asset in the ordinary course of business should be presented in a statement of cash flows prepared using the indirect method as an addition to net income Group of answer choices True False
In the statement of cash flows using indirect method, depreciation is treated as an adjustment to reported profit because depreciation a. reduces the reported profit and involves an outflow of cash. b. reduces the reported profit but does not involves an outflow of cash. c. is an outflow of cash for asset replacement d. represent a significant portion of operating expense
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Under the indirect method, depreciation expense is addedto net income to report cash flows from operating activities. Does depreciation cause an inflow of cash?
Depreciation and amortization are added back in computing operating cash flows because: a They represent outflows that record the wear and tear on assets over their estimated useful lives, as per accounting principles. b They represent variable costs of production. c It is required under SEC guidelines. d Excess cash has been deducted in the income statement.
To prepare the statement of cash flows using the indirect method: Group of answer choices A)A decrease in inventory is added to net income. B)A purchase of a machine is subtracted from net income. c)Cash paid for dividends is added to net income. d)A decrease in accounts payable is added to net income. e)None of the above