Questions
COMM_V 320 DD4 2025W1 Part A Final Exam December 15, 2025 Part A Multiple Choice - 30 minutes
Single choice
The indirect method starts with net earnings and converts them to net cash provided by operating activities. This means that:
Options
A.the indirect method adjusts net earnings, for items that affected reported net earnings but did not affect cash.
B.the indirect method starts with net earnings and adds back all the expenses relating to operating activities.
C.the indirect method adjusts net earnings for contra account balances.
D.the indirect method calculates net earnings as the difference between net assets and net liabilities.
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Step-by-Step Analysis
The question concerns the indirect method of preparing the statement of cash flows and what it implies when starting from net earnings.
Option 1: 'the indirect method adjusts net earnings, for items that affected reported net earnings but did not affect cash.' This is correct in concept: the indirect method reconciles net income to cash from operating activities by adjusting for non-cash items (such as depr......Login to view full explanationLog in for full answers
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