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Match the Letter with the Correct Column to Indicate How

Question 113

Matching

Match the letter with the correct column to indicate how each revenue or expense account on the income statement is adjusted when using the direct method to determine net cash flow from operating activities.

Premises:

Responses:

increase in accumulated depreciation

S-Subtract item from revenue or expense

increase in prepaid expenses

A-Add item to revenue or expense

increase in interest payable

N-No adjustment necessary

decrease in accounts payable

decrease in prepaid income tax

decrease in deferred revenue

decrease in accounts receivable

increase in accrued expenses

increase in notes payable

increase in inventory

Premises:

increase in accumulated depreciation

increase in prepaid expenses

increase in interest payable

decrease in accounts payable

decrease in prepaid income tax

decrease in deferred revenue

decrease in accounts receivable

increase in accrued expenses

increase in notes payable

increase in inventory

Responses:

S-Subtract item from revenue or expense

A-Add item to revenue or expense

N-No adjustment necessary

Correct Answer:

Premises:

Responses:

increase in accumulated depreciation

increase in prepaid expenses

increase in interest payable

decrease in accounts payable

decrease in prepaid income tax

decrease in deferred revenue

decrease in accounts receivable

increase in accrued expenses

increase in notes payable

increase in inventory

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