A Company Uses the Direct Method to Prepare the Statement

question 22

Multiple Choice

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

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

• A)The increase of $15,000 will be subtracted from net income.
• B)The increase of $15,000 will be subtracted from sales to determine cash received from customers.
• C)The increase of $15,000 will be added to sales to determine cash received from customers.
• D)The increase of $15,000 will be added to net income.

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Definitions:

Capitalist System

An economic system where trade, industries, and the means of production are largely or entirely privately owned and operated for profit.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of the good that suppliers are willing to provide.

Left Shift

In computing, it refers to the operation of moving bits of a binary number to the left, effectively multiplying the number by a power of two.

Capitalism

Economic system that rewards companies for their ability to perceive and serve the needs and demands of consumers; also called the private enterprise system.