Assume a Company Uses the Direct Method to Prepare Its

question 136

Multiple Choice

Assume a company uses the direct method to prepare its statement of cash flows.If the company's inventory and accounts payable both increase during the accounting period,how would these changes affect cash flow calculations?

• A)The changes in each account are both added to net income.
• B)The change in inventory is subtracted from cost of goods sold and the change in accounts payable is added to cost of goods sold to find the cash paid to suppliers.
• C)The changes in each account are both subtracted from net income.
• D)The change in inventory is added to cost of goods sold and the change in accounts payable is subtracted from cost of goods sold to find the cash paid to suppliers.

---

Definitions:

Blood PH

The measure of acidity or alkalinity of the blood, vital for maintaining homeostasis, with a normal range of approximately 7.35 to 7.45.

Hyperventilates

The condition of breathing at an abnormally rapid rate, leading to excessive loss of carbon dioxide.

Trachea

The windpipe; a tube that connects the pharynx and larynx to the lungs, allowing the passage of air.

Epiglottis

Structure that covers the glottis, the air-tract opening, during the process of swallowing.