Asked by Football news With Scott and Lucas on Jun 25, 2024

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Which of the following statements are false when using the indirect method?

A) A loss on the sale of equipment is added to net income in calculating cash provided by operating activities.
B) An increase in accounts receivable during a period is deducted from net income in calculating cash provided by operating activities.
C) An increase in accounts payable during a period is added to net income in calculating cash provided by operating activities.
D) A decrease in accumulated depreciation during a period is added to net income in calculating cash provided by operating activities.

Loss on Sale

A situation where the proceeds from selling an asset are less than its book value, resulting in a financial loss for the entity.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Operating Activities

Activities related to the core business functions of a company, such as selling goods or services and managing expenses.

  • Gain insight into the variances and commonalities in how cash flows from operating activities are detailed using direct versus indirect methods.
  • Understand the adjustments necessary in transitioning from accrual to cash basis in the operating section.
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DG
denetriA gardnerJun 26, 2024
Final Answer :
D
Explanation :
A decrease in accumulated depreciation is not added to net income in the indirect method of cash flow statement preparation. Accumulated depreciation typically does not decrease, as it represents the total depreciation expense accumulated over the years for assets. If it does decrease, it might be due to asset disposal, but the adjustment in the cash flow statement would relate to the gain or loss on disposal, not adjusting for changes in accumulated depreciation directly.