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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