Question

[23] In a statement of cash flows of a business enterprise, which of the following will increase reported cash flows from operating activities using the direct method? (Ignore income tax considerations.) A. Dividends received from investments. B. Gain on sale of equipment. C. Gain on early retirement of bonds. D. Change from straight-line to accelerated depreciation.

Answer 1

A. Dividends received from investments

Step-by-step explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

Under the direct method of the operating activity, the revenue income should be added in the net income whereas the expenses are deducted.

So, Dividends received from investments is an income which is to be added whereas Gain on sale of equipment, and Gain on early retirement of bonds are deducted from the net income. ]

And, the Change from straight-line to accelerated depreciation is not impacting the cash flow statement.