A Company Uses the Direct Method to Prepare the Statement

question 86

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 inventory in the operating activities category of the cash flow statement?

• 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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Definitions:

Pricing

The process of determining the value at which a product or service will be sold to consumers.

Marketing Mix

Refers to the set of actions, or tactics, a company uses to promote its brand or product in the market, traditionally encompassed by the four Ps: Product, Price, Place, and Promotion.

Commoditized Markets

Markets where the products available from different suppliers are so similar that they are interchangeable and competition is primarily based on price.

Buying Allowance

A promotional or pricing strategy where buyers are given a specific discount or allowance on bulk purchases.