A Company Uses the Direct Method to Prepare the Statement

question 88

Multiple Choice

A company uses the direct method to prepare the statement of cash flows. How will the amount of cash received from customers be computed?

• A)The amount of cash received from customers is computed as cost of goods sold plus ending inventory minus beginning inventory.
• B)The amount of cash received from customers is computed as cost of goods sold minus ending inventory plus beginning inventory.
• C)The amount of cash received from customers is computed as sales revenue plus the decrease (or minus the increase)in accounts receivable.
• D)The amount of cash received from customers is computed as sales revenue minus the decrease (or plus the increase)in accounts receivable.

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Definitions:

Creditors

Individuals or entities to whom money is owed by debtors; they have a legal right to demand payment according to the terms of the debt agreement.

RUPA

stands for the Revised Uniform Partnership Act, which is a set of laws adopted by states to govern the operation of partnerships.

Dissociated Partner

A partner who has severed their relationship with a partnership, resulting in a change in the business's management or structure.

Transaction

A business deal or action, such as buying, selling, or trading, involving two or more parties exchanging goods, services, or financial assets.