A Company Uses the Direct Method to Prepare the Statement

question 49

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 inventory?

• A)The decrease of $20,000 will be subtracted from net income.
• B)The decrease of $20,000 will be added to net income.
• C)The decrease of $20,000 will be subtracted from cost of goods sold to determine payments to suppliers.
• D)The decrease of $20,000 will be added to cost of goods sold to determine payments to suppliers.

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