Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Dividend Income (assume that cash received is equal to amount reported)-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:
A)Add to net income to arrive at net cash flows from operating activities.
B)Subtract from net income to arrive at net cash flows from operating activities.
C)Not used to adjust net income to calculate net cash flows from operating activities.

Question

Quizplus · Accepted Answer

Dividend income is already included in net income and represents cash received, so it does not require an adjustment when calculating net cash flows from operating activities using the indirect method.

Assume the Indirect Method Is Used to Compute Net Cash