Question

Which of the following is shown in the Operations section of the direct method statement of cash flows but not the indirect method statement of cash flows?

Select one:

a. 10% Stock Dividend

b. Interest Paid

c. Dividends Paid

d. Common Stock issued for Cash

e. Depreciation Expense

Answer 1

  Answer

b) Interest paid

Explanation

Interest paid is shown has operating cash payments in the direct method of cash flow statement whereas it will not appear in the indirect method of operation section but will appear under the finance section of the indirect method as an outflow of cash.

A 10% stock dividend received will be shown in the indirect operation section of the cash flow statement as deductions whereas it is shown as an investing activity in the indirect method of cash flow statement.

Dividend paid will be shown in the indirect operation section of the cash flow statement whereas it will be shown as a financing activity indirect method.

Common stock issued for cash is shown under both methods of cash flows as cash inflow flow from financing activities.

Depreciation expense will not come under the direct method of cash flows but it is used to add back from the net income in the section of cash from operations under the indirect method of cash flow statements to determine cash from operating activities.