Answered: On the indirect statement of cash…

On the indirect statement of cash flows, $500,000 relating to notes payable was subtracted from net income to get indirect cash flow from operations. This must mean that:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On the indirect statement of cash flows, $500,000 relating to notes payable was subtracted from net income to get indirect cash flow from operations.

This must mean that:

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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When using the Indirect Method of preparing the Statement of Cash Flows, in the operating section, some accounts are added and some costs are subtracted. If you had to explain to someone why an increase in accounts receivable is subtracted and the opposite as to why a decrease In accounts recelvable is added, what information would you relay to them? (Include in your response the concept of accruals, FASB guidelines, sales and net income on the income statement, and the balance sheet). Answer should be in a paragraph form.
When preparing a statement of cash flows, cash equivalents are subtracted from cash in order to calculate the net change in cash during a period. True False
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Oo.25. Subject :- Account