In preparing the cash flows from operating activities section of a statement of cash flows (using the indirect method), which of the following statements are correct?

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter15: Statement Of Cash Flows
Section: Chapter Questions
Problem 4BE
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4. What is the correct answer?
In preparing the cash flows from operating activities section
of a statement of cash flows (using the indirect method),
which of the following statements are correct?
1. Loss on sale of operating non-current assets should
be deducted from profit before tax.
2. Increase in inventory should be deducted from
operating profits.
3. Increase in payables should be added to operating
profits.
4. Depreciation expense should be added to profit
before tax.
A) 1, 2 and 3
B) 1, 2 and 4
C) 1,3 and 4
D) 2, 3 and 4
Transcribed Image Text:In preparing the cash flows from operating activities section of a statement of cash flows (using the indirect method), which of the following statements are correct? 1. Loss on sale of operating non-current assets should be deducted from profit before tax. 2. Increase in inventory should be deducted from operating profits. 3. Increase in payables should be added to operating profits. 4. Depreciation expense should be added to profit before tax. A) 1, 2 and 3 B) 1, 2 and 4 C) 1,3 and 4 D) 2, 3 and 4
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