QuestionAugust 7, 2025

When preparing a statement of cash flows using the indirect method, which of the following should not be classified as an operating cash flow? Multiple Choice An increase in accounts receivable. A decrease in accounts payable. Proceeds from the disposal of a long-term asset with no gain or loss. An increase in prepaid expenses.

When preparing a statement of cash flows using the indirect method, which of the following should not be classified as an operating cash flow? Multiple Choice An increase in accounts receivable. A decrease in accounts payable. Proceeds from the disposal of a long-term asset with no gain or loss. An increase in prepaid expenses.
When preparing a statement of cash flows using the indirect method, which of the following should not be classified as an operating
cash flow?
Multiple Choice
An increase in accounts receivable.
A decrease in accounts payable.
Proceeds from the disposal of a long-term asset with no gain or loss.
An increase in prepaid expenses.

Solution
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Answer

Proceeds from the disposal of a long-term asset with no gain or loss. Explanation 1. Identify Operating Cash Flows Operating cash flows include changes in current assets and liabilities, except for transactions related to long-term assets or financing. 2. Analyze Each Option - **Increase in accounts receivable**: Operating activity. - **Decrease in accounts payable**: Operating activity. - **Proceeds from the disposal of a long-term asset**: Investing activity. - **Increase in prepaid expenses**: Operating activity.

Explanation

1. Identify Operating Cash Flows<br /> Operating cash flows include changes in current assets and liabilities, except for transactions related to long-term assets or financing.<br /><br />2. Analyze Each Option<br /> - **Increase in accounts receivable**: Operating activity.<br /> - **Decrease in accounts payable**: Operating activity.<br /> - **Proceeds from the disposal of a long-term asset**: Investing activity.<br /> - **Increase in prepaid expenses**: Operating activity.
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