Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?
A)Credit sales.
B)Cash collections from customers.
C)Depreciation expense.
D)Cash received from the sale of a building.
E)Cash received from the sale of treasury stock.

Question

Quizplus · Accepted Answer

Cash collections from customers are a source of cash from operating activities when using the direct method because they are directly related to the primary operations of the business. Credit sales, depreciation expense, cash received from the sale of a building, and cash received from the sale of treasury stock are not sources of cash from operating activities when using the direct method.

Which of the Following Transactions or Events Should Be Reported