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.

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Definitions:

Manufacturing Business

A company involved in the transformation of raw materials into finished products through the use of machinery and labor.

Free-Flow Layout

A store or workplace arrangement where fixtures and merchandise are grouped in an informal, non-linear manner to encourage exploration by customers.

Hat Shop

A retail store specializing in selling hats and headwear.

Process Layout

An arrangement of resources in a manufacturing or service system according to the sequence of operations that need to be performed.