A Company Uses the Direct Method to Prepare the Statement

question 121

Multiple Choice

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its financial statements. *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?

• A)The increase of $10,000 will be subtracted from net income.
• B)The increase of $10,000 will be added to net income.
• C)The increase of $10,000 will be added to purchases to determine payments to suppliers.
• D)The increase of $10,000 will be subtracted from purchases to determine payments to suppliers.

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Definitions:

Indifference Curve Analysis

A graphical representation used in microeconomics to show combinations of two goods that provide the consumer with equal levels of utility.

Demand Curve

A graphical representation showing how the quantity demanded of a commodity changes with changes in its price, typically depicting an inverse relationship.

Budget Line

A graphical representation showing the combination of goods a consumer can purchase with a given income.

Money Income

The total amount of monetary earnings received by an individual or household in a specific period, including wages, salaries, and other forms of income.