A Company Uses the Indirect Method to Prepare the Statement

question 89

Multiple Choice

A company uses the indirect 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 receivable?

• A)The increase of $15,000 will be subtracted from sales revenue.
• B)The increase of $15,000 will be added to net income.
• C)The increase of $15,000 will be subtracted from net income.
• D)The increase of $15,000 will be added to sales revenue.

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Definitions:

Raw Materials

Raw materials are the basic, unprocessed inputs needed in the manufacturing process to produce finished goods.

Factory Payroll

Factory Payroll includes the total compensation paid to employees working within the manufacturing operations, directly involved in producing goods.

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product.

Raw Materials

Basic materials that are used in the initial stages of the production process, before being transformed into finished products.