A Company Uses the Direct Method to Prepare the Statement

question 6

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 accounts receivable in the operating activities category of the cash flow statement?

• 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:

Begging the Question

A logical fallacy in which the conclusion of an argument is assumed in the premise, essentially arguing in a circle.

Truth

The quality or state of being in accord with fact or reality.

Appeal to Ignorance

A fallacy in which a conclusion is based on the absence of evidence rather than the presence of evidence.

Focus Group

A targeted group of people brought together to discuss and provide feedback on a particular subject or product.