When Preparing the Statement of Cash Flows Using the Indirect

question 70

Multiple Choice

When preparing the statement of cash flows using the indirect method,an increase in accounts payable would appear as:

• A) a decrease in the operating activities section
• B) an increase in the operating activities section
• C) a use of cash in the investing activities section
• D) a source of cash in the investing activities section

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Definitions:

Cost Predictions

The process of estimating the costs that a company will incur over a specific period, often used for budgeting and financial planning purposes.

Variable Costs

Costs that vary directly with the level of production or volume of output, such as materials and labor directly involved in manufacturing.

Step-Variable Costs

Costs that remain fixed for certain levels of production or capacity but can change in steps when a critical level is surpassed.

Fixed Costs

Expenses that remain constant for a given period of time regardless of the level of outputs or activity.