Avatar Company Uses the Indirect Method to Prepare the Statement

question 101

True/False

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet:
$\begin{array}{|l|r|r|r|}\hline&2014 & 2013 & \text { Increase/decrease }\\\hline \text { Cash } & \$ 33,000 & \$ 18,000 & \$ 15,000 \\\hline \text { Accounts receivable } & 22,000 & 35,000 & (13,000) \\\hline \text { Inventory } & 170,000 & 115,000 & 55,000 \\\hline \text { Total assets } & \$ 225,000 & \$ 168,000 & \$ 57,000 \\\hline\end{array}$
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The change in inventory will be shown as a positive cash flow in the adjustments to Net income.

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Definitions:

Preferred Course of Action

The most favorable or desirable path to take in making a decision or solving a problem.

Decision-making Process

A step-by-step approach to making choices or solving problems, ranging from gathering information to evaluating alternatives and making the final choice.

Implemented Solutions

Strategies or methods that have been put into action in order to address and solve specific problems or challenges.

Alternative Solutions

Alternative solutions are different options or strategies considered in problem-solving or decision-making processes to achieve desired outcomes.