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Indicate Whether Each Item Should Be Added to or Subtracted

Question 58

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indicate whether each item should be added to or subtracted from net income to arrive at the net cash flow from operating activities.

Premises:

Responses:

Increase in inventory

Amortization of discount on investment in bonds

Decrease in accounts payable

Amortization of discount on bonds payable

Increase in salaries payable

Increase in prepaid expenses

Subsidiary loss under the equity method

Gain on disposal of equipment

Decrease in accounts receivable

Increase in deferred tax liability

Premises:

Increase in inventory

Amortization of discount on investment in bonds

Decrease in accounts payable

Amortization of discount on bonds payable

Increase in salaries payable

Increase in prepaid expenses

Subsidiary loss under the equity method

Gain on disposal of equipment

Decrease in accounts receivable

Increase in deferred tax liability

Responses:

Correct Answer:

Premises:

Responses:

Increase in inventory

Amortization of discount on investment in bonds

Decrease in accounts payable

Amortization of discount on bonds payable

Increase in salaries payable

Increase in prepaid expenses

Subsidiary loss under the equity method

Gain on disposal of equipment

Decrease in accounts receivable

Increase in deferred tax liability