1)Which section of the statement of cash flows may be prepared using either the

Question

1)Which section of the statement of cash flows may be prepared using either the direct method or the indirect method?

Multiple Choice

All of these answers are correct.

Operating activities

Financing activities

Investing activities

2)

When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment for an increase in the accounts receivable balance?

Multiple Choice

Add the increase to net income

Deduct the increase from net income

Add the increase to cash collections from customers

Add the increase to cash payments to suppliers

Explanation / Answer

1)Which section of the statement of cash flows may be prepared using either the direct method or the indirect method?

Only cash flow from operating activities can be made either direct method or indirect method

so answer is Operating activities

2) When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment for an increase in the accounts receivable balance?

If increase in account receivable then it would be deducted from net income

so answer is Deduct the increase from net income

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