under the direct method of determining the net cash provided by operating activities 641353

1. An increase in long term notes payable is considered to be a financing activity and a source of cash on the statement of cash flows.

2. Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, an increase in accounts receivable would be deducted from net income to arrive at net cash provided by financing activities.

3. A loss on the sale of an asset would be deducted from net income in computing cash from operating activities under the indirect method on the statement of cash flows.

4. Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, an increase in accounts payable would be recorded as a  deduction from net income.

5. Under the indirect method of determining the net cash provided by operating activities

on the statement of cash flows, an increase in inventory would be added to net income.

6. In computing the net cash provided by operating activities under the indirect method on the statement of cash flows, a decrease in accounts payable would be added to net income.

7. An increase in a prepaid expense would be deducted from net income in computing net cash provided by operating activities on the statement of cash flows under the indirect method.

8. A gain on the sale of equipment would be included as part of a company”s investing activities on the statement of cash flows.

9. Payment of cash dividends to shareholders is considered to be an operating activity on the statement of cash flows.

10. Payment of accrued taxes is considered an operating activity on the statement of cash flows.

11. The sale of preferred stock for cash would be classified as an investing activity in the statement of cash flows.

12. The collection of a long term loan made to a supplier would be treated as an investing activity on a statement of cash flows.

13. Borrowing on a long term note would be considered a financing activity and a source of cash on the statement of cash flows.

14. Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in inventory would be deducted from cost  of goods sold to convert cost of goods sold to a cash basis.

15. Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, a decrease in prepaid expenses would be added to operating expenses to convert operating expenses to a cash basis.