Assume a Company Uses the Indirect Method to Prepare Its

question 11

Multiple Choice

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

• A) Both are added to net income.
• B) The change in accounts payable is added to net income; the change in supplies is subtracted.
• C) Both are subtracted from net income.
• D) The change in supplies is added to net income; the change in accounts payable is subtracted.

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Definitions:

Movie Tickets

Proof of purchase for entry to a cinema or theater showing, usually indicating a specific film, time, and seat assignment.

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Demand decrease refers to a downward shift in the demand curve, indicating that consumers are willing to purchase less of a good at any given price.

General Equilibrium Analysis

An economic framework for understanding how supply and demand interact across multiple markets to determine prices in an entire economy.

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The process where outcomes or outputs of a system loop back to influence the inputs or initial conditions, often amplifying or dampening effects in the system.