In Calculating Cash Flows from Operating Activities, a Decrease in Accounts

question 35

Multiple Choice

In calculating cash flows from operating activities, a decrease in accounts payable during a period

• A) means that accrual basis income is less than cash basis income.
• B) requires an addition to net income under the indirect method.
• C) requires an increase to cost of goods sold under the direct method.
• D) requires a decrease to cost of goods sold under the direct method.

---

Definitions:

Engine Output

The amount of power produced by an engine, typically measured in horsepower or kilowatts.

Compression Test

A diagnostic tool used to measure the amount of pressure that an engine's cylinders can generate, indicating the health of the engine's internal components.

Torque

The rotational or twisting force applied to an object; crucial in determining an engine's power.

Inertia

A physical principle stating that an object will remain at rest or in uniform motion in a straight line unless acted upon by an external force.