A Company Uses the Indirect Method to Prepare the Statement

question 124

Multiple Choice

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

*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?

• 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 subtracted from cost of goods sold.
• D)The increase of $10,000 will be added to cost of goods sold.

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Definitions:

Contractual Obligations

Legally binding promises or duties agreed upon by parties within a contract, necessitating performance or restraint from certain actions.

Counteroffer

A response to an offer in negotiations that makes modifications to the initial offer.

Common Law

Common Law is a body of unwritten laws based on legal precedents established by the courts.

Mirror Image

A rule in contract law stating that an offer must be accepted exactly with no modifications; the acceptance must "mirror" the offer.