When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because
a. cash was increased while cost of goods sold was decreased.
b. cost of goods sold on an accrual basis is lower than on a cash basis.
c. acquisition of inventory is an investment activity.
d. inventory purchased during the period was less than inventory sold resulting in a net cash increase.
Answer: B
Learn More :
Accounting Chapter 23
- Foxx Corp.'s comparative balance sheet at December 31, 2013 and 2012 reported accumulated depreciation balances of $850,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $38,000 was the only property sold in 2013. Depreciation charged to operations in 2013 was
- A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance.
- How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?
- Which of the following is shown on a statement of cash flows?
- In reporting extraordinary transactions on a statement of cash flows (indirect method), the
- Dolan Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Moss Co. during the current year, even though no dividends were declared or paid by Moss during the year. On Dolan's statement of cash flows (indirect method), the $25,000 should
- Which of the following is false concerning the statement of cash flows?
- 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?
- When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?
- Which of the following statements is correct?
- When preparing a statement of cash flows, the following are used for which method in determining cash flows from operating activities? Gross Accounts Receivable Net Accounts Receivable
- When preparing a statement of cash flows, a decrease in prepaid insurance during a period would require which of the following adjustments in determining cash flows from operating activities? Indirect Method Direct Method
- When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustments in determining cash flows from operating activities? Indirect Method Direct Method
- In determining net cash flow from operating activities, a decrease in accounts payable during a period
- When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in determining cash flow from operating activities? Direct Method Indirect Method
- Crabbe Company reported $80,000 of selling and administrative expenses on its income statement for the past year. The company had depreciation expense and an increase in prepaid expenses associated with the selling and administrative expenses for the year. Assuming use of the direct method, how would these items be handled in converting the accrual based selling and administrative expenses to the cash basis? Increase in Depreciation Prepaid Expenses
- The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n)
- Which of the following would be classified as a financing activity on a statement of cash flows?
- Xanthe Corporation had the following transactions occur in the current year:
- In a statement of cash flows, the cash flows from investing activities section should report
- Declaration of a cash dividend on common stock affects cash flows from operating activities under the direct and indirect methods as follows: Direct Method Indirect Method
- When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities?
- A statement of cash flows typically would not disclose the effects of
- An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.