Assume a Company Uses the Indirect Method to Prepare Its

question 174

Multiple Choice

Assume a company uses the indirect method to prepare its statement of cash flows.If Inventory 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 inventory 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 inventory is subtracted.

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Definitions:

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An English playwright and poet, widely regarded as one of the greatest writers in the English language and world literature.

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The context in which the performance takes place, including location, décor, and props.

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