When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

Multiple Choice

A. An increase in prepaid expenses.

B. A decrease in accrued expenses payable.

C. Proceeds from the disposal of a long-term asset with no gain or loss.

D. An increase in accounts receivable

Question

Reina Webb

Business

24 August, 01:45

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

Multiple Choice

A. An increase in prepaid expenses.

B. A decrease in accrued expenses payable.

C. Proceeds from the disposal of a long-term asset with no gain or loss.

D. An increase in accounts receivable

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Answers (1)

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Brianna Knapp · Answer 1

C. Proceeds from the disposal of a long-term asset with no gain or loss.

Explanation:

Operating activities: it involves those transactions that after net income written impact the working capital. It would subtract the rise in current assets and a reduction in current liabilities, while adding the decline in current assets and an increase in current liabilities.

It would adjust the changes in working capital. In addition, the depreciation expense adds to the net revenue. And the loss on asset sales is added, while the gain on asset sales is deducted