Question
17. To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done
17. To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by
a. re-recording all income statement transactions that directly affect cash in a separate cash flow journal.
b. estimating the percentage of income statement transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions.
c. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash.
d. eliminating all transactions that have no current or future effect on cash, such as depreciation, from the net income computation.
a. cash was increased while cost of goods sold was decreased.
b. cost of goods sold on an accrual basis is lower than on a cash basis.
c. acquisition of inventory is an investment activity.
d. inventory purchased during the period was less than inventory sold resulting in a net cash increase.
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