Using the Indirect Method (Statement of Cash Flows),a Decrease in Inventory

question 56

Multiple Choice

Using the indirect method (statement of cash flows) ,a decrease in inventory would:

• A)be subtracted from net income
• B)be added to net income
• C)have no adjustment made to net income
• D)be added to the investing section of the statement of cash flows

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Definitions:

Materials

The raw items or components used in the manufacturing process to produce goods or services.

Conversion Costs

The combined costs of direct labor and manufacturing overhead incurred to convert raw materials into finished products.

Equivalent Unit

A concept used in cost accounting to express the amount of work done on incomplete units in terms of fully completed units.