Which of the following items about the statement of cash flows is correct?
A)Noncash expenses such as depreciation are deducted from profit with the indirect method in computing cash flows from operating activities.
B)Cash equivalents are highly liquid investments with maturities at the date of purchase of less than three months.
C)The acquisition of land by issuing bonds payable would not appear on the statement of cash flows.
D)Cash paid for interest would be classified as a financing cash flow.

Question

Quizplus · Accepted Answer

Option A is incorrect because noncash expenses such as depreciation are added back to profit with the indirect method in computing cash flows from operating activities. Option B is correct because cash equivalents are highly liquid investments that can be quickly sold for cash and have maturities of three months or less at the time of purchase. Option C is incorrect because the acquisition of land by issuing bonds payable is considered a non-cash activity, and it would be reported in the non-cash section of the statement of cash flows. Option D is incorrect because cash paid for interest would be classified as an operating cash flow, not a financing cash flow.

Which of the Following Items About the Statement of Cash