Tracy Company Reports the Following in Its Statement of Cash

question 29

Multiple Choice

Tracy Company reports the following in its statement of cash flows:
$\begin{array}{lr}\text { Net income } & \$ 1,000 \\\text { Depreciation and amortization } & 350 \\\text { Decrease (Increase) in accounts receivable } & (10) \\\text { Decrease (Increase) in inventory } & 200 \\\text { Decrease (Increase) in prepaid expenses } & 80 \\\text { Increase (Decrease) in trade payables } & (300) \\\text { Increase (Decrease) in taxes payable } & 75 \\\text { Cash flow from operations } & \$ 1.395\end{array}$

-Tracy used the indirect method of determining cash flow from operations (CFO) . If it had used the direct method:

• A)CFO would have been higher as gains are not deducted in arriving at CFO.
• B)CFO would have been lower as losses and depreciation are not added back in arriving at CFO.
• C)CFO would have been the same.
• D)it is not possible to determine what CFO would have been without more information.

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Definitions:

Substitute Resources

Alternative inputs or resources that can be used in place of another in the production process.

MRP

Material Requirements Planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes.

Wage Rate

The amount of money paid to an employee per unit of time, such as hourly or yearly.

MRP

Marginal Revenue Product, which is the additional revenue generated by employing one more unit of a resource, such as labor or capital.