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Determine the cash flow from operating activities

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Reference no: EM132796897

Problem 1: Which of the following is true of the indirect method used to determine the cash flow from operating activities?

a. The indirect method results in a greater amount of cash flow than the direct method.

b. FASB prefers the use of indirect method.

c. The indirect method starts with the amount of net income.

d. Majority of the reporting companies in U.S. uses the direct method.

e. Nonoperating gains and losses are ignored while computing cash flows from operations.

Problem 2: Which of the following would be subtracted from net income when computing cash flows from operating activities using the indirect method?

a. An increase in rent payable for the year

b. Depreciation expense

c. A decrease in inventory for the year

d. An increase in prepaid rent for the year

e. A loss on the sale of equipment

Reference no: EM132796897

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