Paying wages and salaries to employees is classified as a cash outflow in the op

Question

Paying wages and salaries to employees is classified as a cash outflow in the operating activities section of the statement of cash flows. True False A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. True False Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, a loss on the sale of an asset would be added to net income. True False Vertical analysis of financial statements is accomplished by preparing common-size statements. True False When computing the net cash provided by operating activities under the indirect method on the statement of cash flows, an increase in prepaid expenses would be added to net income. True False As the accounts receivable turnover ratio decreases, the average collection period increases. True False

Explanation / Answer

3. Paying wages and salaries to employees is classified as a cash outflow in operating activities section of the settlement of cash flows=

A TRUE

4. A direct cost is a cost that cannot be easily traced to the particular cost object under consideration

B FALSE

5. under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, a loss on the sale of an asset would be added to net income

A TRUE - loss on sale of asset is non operating/ non cash expense hence added to net income

6. Vertical analysis of financial statements is accomplished by preparing common size statements

A TRUE

7. when computing the net cash provided by operating activities under the indirect method on the statement of cash flows, an increase in prepaid expense would be added to net income

B. TRUE, increase in current asset is inflow of cash, and increase working capital hence added to net income

8. as the accounts receivable turnover ratio decreases, the average collection period increases

A. TRUE

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