Lester Corporation’s statement of cash flows for 2009 shows the following investingactivities: | ||
Proceeds from sale of marketable securities | $ 160,000 | |
Purchase of land | (250,000) | |
Proceeds from sale of land | 125,000 | |
| Net cash provided by investing activities | $ 15,000 |
Lester’s income statement for 2009 includes the following: | ||
Loss on sale of marketable securities | $47,000 | |
Gain on disposal of land | 65,000 | |
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Which of the following correctly describes a difference between the direct method and the indirectmethod of computing operating cash flow?
a The direct method is used when accounting records are kept on a cash basis; the indirect method is used when accounting records are maintained on an accrual basis.
b The direct method may be used only when a company maintains special journals for cash receipts and cash disbursements; the indirect method is used in all other situations.
c Both the direct and the indirect methods result in the same net cash flow from operating activities, but the format of this section of the statement of cash flows is different under the alternative methods.
d The direct method is used when all accounting records and bank statements are available; the indirect method is used when some accounting records or documents are missing or have been destroyed.
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