Assume a Company Uses the Indirect Method to Prepare Its

question 52

Multiple Choice

Assume a company uses the indirect method to prepare its statement of cash flows. If Inventory decreases and Unearned Revenue increases during an accounting period, what does the company do with the changes in these accounts to calculate cash flows from operating activities?

• A) Both are added to net income.
• B) The change in inventory is added to net income; the change in unearned revenue is subtracted.
• C) Both are subtracted from net income.
• D) The change in unearned revenue is added to net income; the change in inventory is subtracteD.
• Decreases in current assets (Inventory) and increases in current liabilities (Unearned Revenue) are added to convert net income to cash flows from operating activities.

---

Definitions:

Personal Relationships

Connections between individuals characterized by emotional bonds, interpersonal communication, and mutual experiences.

Communication Strategy

A plan that outlines how to effectively convey messages to target audiences, including the channels, techniques, and timing used for communication.

Effective Motivator

An individual or strategy that successfully encourages or stimulates people to take action or to increase effort towards achieving a goal.

Financial Incentives

Monetary benefits offered to stimulate performance, motivate behaviors, or achieve desired outcomes in organizational or personal contexts.