In the preparation of a statement of cash flows, adjustments to net income to reconcile net income to cash from operating activities include
A) dividends received.
B) the difference between the purchase price and the resale price of treasury stock (assuming the cost method of accounting for treasury stock).
C) amortization of organization cost.
D) redemption premium on preferred stock redeemed during the period.

Question

Quizplus · Accepted Answer

The amortization of organization cost is a noncash expense that needs to be added back to net income to calculate cash flow from operations.

Dividends received (choice A) would be reported in the investing section of the statement of cash flows, not the operating section.

The difference between the purchase price and the resale price of treasury stock (choice B) would be reported as a financing activity, not an operating activity.

Redemption premium on preferred stock redeemed during the period (choice D) would also be reported in the financing section of the statement of cash flows, not the operating section.

In the Preparation of a Statement of Cash Flows, Adjustments