Assume a Company Uses the Indirect Method to Prepare Its

question 36

Multiple Choice

Assume a company uses the indirect method to prepare its statement of cash flows.If Accounts Receivable decreases and Unearned Revenue increases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?

• A)Both are added to net income.
• B)The change in accounts receivable is added to net income;the change in unearned revenue is subtracted.
• C)Both are subtracted from net income.
• D)The change in unearned revenue is added to net income;the change in accounts receivable is subtracted.

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Definitions:

Demand Schedule

a table that shows the quantity of a good or service that consumers are willing and able to purchase at various price points.

Quantities

The amounts or numbers of a material or item available or required.

Various Prices

Describes a market scenario where identical or similar goods or services are sold at different price points.

Demand Schedule

A table or graph showing the quantity of a good that consumers are willing to purchase at each possible price.