An Increase in the Inventory Account from $10,000 at the Beginning

question 205

Multiple Choice

An increase in the Inventory account from $10,000 at the beginning of the year to $15,000 at the end of the year would be shown on the statement of cash flows prepared under the indirect method as:

• A) an addition to net income of $5,000 in order to arrive at net cash provided by operating activities.
• B) a deduction from net income of $5,000 in order to arrive at net cash provided by operating activities.
• C) an addition to net income of $15,000 in order to arrive at net cash provided by operating activities.
• D) a deduction from net income of $10,000 in order to arrive at net cash provided by operating activities.

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Definitions:

Age of Majority

The legally defined age at which an individual is considered an adult and is responsible for his or her actions and eligible to vote, among other adult rights.

Contracts

Legally binding agreements between two or more parties, detailing obligations and rights concerning the exchange of goods, services, or property.

Adults

Individuals who have reached the age of majority, legally recognized as capable of entering into binding contracts and being responsible for their actions.

Illegal Contract

A contract that is void because it involves the performance of an unlawful act.