A Company Uses the Indirect Method to Prepare the Statement

question 115

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 inventory?

• A)The decrease of $15,000 will be subtracted from net income.
• B)The decrease of $15,000 will be subtracted from cost of goods sold.
• C)The decrease of $15,000 will be added to net income.
• D)The decrease of $15,000 will be added to cost of goods sold.

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Definitions:

Item Value

The worth or utility that a specific item or product holds for an individual or the market.

Ownership

The state or fact of exclusive rights and control over property, which can be an object, land/real estate, or intellectual property.

Reference Point

A baseline or standard used for comparison in financial and economic analysis, often to gauge changes or differences.

Economic Decisions

Economic decisions involve choices about resource allocation, production, distribution, and consumption within an economy, often under conditions of scarcity.