Which of the Following Independent Transactions Would Cause Net Income

question 145

Multiple Choice

Which of the following independent transactions would cause net income to be more than cash from operating activities?

• A) A decrease in the accounts receivable account
• B) An increase in the merchandise inventory account
• C) An increase in the accounts payable account
• D) An increase in the accrued wages account

Understand the concept of discounting the face value of a loan and how it affects the borrower's proceeds.

Calculate the amount of discount and proceeds for various loans.

Determine the actual interest rate based on proceeds rather than the face value using different day counts (365-day and 360-day years).

Apply knowledge of non-interest-bearing notes and how they are discounted.

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Definitions:

Net Operating Income

The earnings derived from a company's day-to-day operations, after subtracting all operational expenses except interest and taxes.

Absorption Costing

An accounting method that includes all manufacturing costs (both fixed and variable) in the cost of a product.

Contribution Margin

The profit remaining after variable costs have been subtracted from revenue, indicating how much contributes to covering fixed costs and generating profit.

Variable Cost

Variable costs are expenses that change in proportion to the activity of a business, such as materials and labor costs.