Rubin Installations Company Uses the Direct Method to Prepare Its

question 154

True/False

Rubin Installations Company uses the direct method to prepare its statement of cash flows.Rubin has reported cost of goods sold of $95,000 on its income statement for 2017.If the balance in the Merchandise Inventory account decreased by $6,000 during the year,then $6,000 needs to be added to $95,000 to calculate payments to suppliers for inventory purchases.

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Definitions:

Useful Life

The expected period over which an asset is anticipated to be productive or beneficial for its owner.

Payback Period

The duration required for an investment to produce sufficient cash flow to recoup its original expense.

Depreciates

The process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value over time.

Revenues

The income generated from normal business operations and includes discounts and deductions for returned merchandise.