Question : 114.Assume the indirect method used to compute net cash flows : 1244227

114.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements — Interest Expense (assume that cash payments are equal to amount reported) — indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Not used to adjust net income to calculate net cash flows from operating activities.

b.

Subtract from net income to arrive at net cash flows from operating activities.

c.

Add to net income to arrive at net cash flows from operating activities.

 

 

 

115.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements — Increase in Income Taxes Payable — indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Not used to adjust net income to calculate net cash flows from operating activities.

 

 

 

116.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements — Depreciation Expense — indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Not used to adjust net income to calculate net cash flows from operating activities.

 

 

 

117.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements — Loss on Sale of Investment — indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Subtract from net income to arrive at net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Not used to adjust net income to calculate net cash flows from operating activities.

 

 

 

118.Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements — Gain on Disposal of Equipment — indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

 

a.

Not used to adjust net income to calculate net cash flows from operating activities.

b.

Add to net income to arrive at net cash flows from operating activities.

c.

Subtract from net income to arrive at net cash flows from operating activities.

 

 

 

119.If the indirect method is used, which of the following would be added to net income to arrive at net cash flows from operating activities?

 

a.

Decrease in Accounts Payable

b.

Decrease in Prepaid Expenses

c.

Increase in Accounts Receivable

d.

Increase in Inventory

 

 

 

 

 

120.If the indirect method is used, which of the following would be subtracted from net income to arrive at net cash flows from operating activities?

 

a.

Decrease in Inventory

b.

Increase in Notes Payable

c.

Depreciation Expense

d.

Decrease in Accounts Payable

 

 

 

121.If the indirect method is used, each of the following is a proper adjustment to net income to arrive at net cash flows from operating activities except

 

a.

deducting a decrease in Prepaid Expenses.

b.

adding an increase in Salaries Payable.

c.

deducting an increase in Accounts Receivable.

d.

adding a decrease in Inventory.

 

 

 

122.Assume that the balance of accounts payable does not change during a period. When preparing a statement of cash flows, an increase in ending inventory over beginning inventory will result in an adjustment to net income under the indirect approach because

 

a.

the amount of cost of goods sold is equal to the amount of cash paid for purchases.

b.

the amount of cash paid for purchases of inventory is less than the amount of cost of goods sold on an accrual basis.

c.

the amount of cost of goods sold on an accrual basis is less than the amount of cash paid for purchases of inventory.

d.

consumed inventory is an expense but not a use of funds.

 

 

 

123.In preparing a statement of cash flows using the indirect method, an increase in an unearned revenue account should

 

a.

be shown as an addition to net income in computing net cash flows from operating activities.

b.

not be shown on the statement of cash flows.

c.

be shown as a deduction from net income in computing net cash flows from operating activities.

d.

be shown as a financing activity.