A Company Uses the Direct Method to Prepare the Statement

question 142

Multiple Choice

A company uses the direct method to prepare the statement of cash flows.It presents the following data on its financial statements:

*Relates solely to the acquisition of inventory
Which of the following is correct about accounts payable transaction in the operating activities category in the statement of cash flows?

• A)The increase of $10,000 will be subtracted from net income.
• B)The increase of $10,000 will be added to net income.
• C)The increase of $10,000 will be added to purchases to determine payments to suppliers.
• D)The increase of $10,000 will be subtracted from purchases to determine payments to suppliers.

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Definitions:

Probability Assignment Rule

A principle that assigns a probability to each outcome of a well-defined experiment in accordance with certain conditions.

Random Spinner

A device used to generate random outcomes, often used in games of chance or to make random selections.

Disjoint Events

Events that cannot happen at the same time.

Ace of Spades

The Ace of Spades is a playing card in the standard deck which often carries unique significance and design in games and culture, sometimes symbolized as good fortune or death.