The Following Information Is Reported in the Operating Activities Section

question 144

Multiple Choice

The following information is reported in the operating activities section of Gateway's statement of cash flows for 2016: $\begin{array}{lr}\text { Net income } & \$ 1,200,000 \\\text { Decrease in inventories } & 600,000 \\\text { Decrease in accounts payable } & 400,000\end{array}$ ? Which one of the following conclusions can be assumed from the information provided?

• A) Gateway purchased more merchandise than it sold in 2016.
• B) Cash payments for merchandise exceeded cost of goods sold by $200,000.
• C) Gateway used the direct method to determine cash flows from operating activities.
• D) Cash payments for merchandise purchases were less than the amount of merchandise purchased on credit during 2016.

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Definitions:

AASB 141

An accounting standard regarding agriculture under the Australian Accounting Standards Board that guides the accounting for agricultural activity.

AASB 141

Refers to the Australian Accounting Standard on Agriculture, guiding on the accounting for agricultural activity including the recognition and measuring of biological assets.

Biological Assets

Living plants or animals that are used in agricultural activities from which agricultural produce is harvested, accounted for under specific accounting standards.

Fair Value

An estimate of the price at which an asset or liability could be exchanged in a current transaction between willing parties.