Question

Which one of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

a loss on the sale of land
dividends paid on common stock
a decrease in accounts payable
a decrease in accrued liabilities

Answer 1

It is loss on the sales of land (A)

Step-by-step explanation:

Option (A) True -The non-cash losses must be added back while the gains must be subtracted because cash flow only recognizes relevant cash transactions that either increases or decreases the cash position.

Option (B) False-This will subtracted because it represents cash outflow from the company.

Option (C) False. This will be subtracted because it represents cash outflow resulting from payment made to suppliers

Option (D) False. This will be subtracted because it represents cash outflow resulting from liability settlement.