Under the Direct Method of Preparing the Statement of Cash

question 126

Multiple Choice

Under the direct method of preparing the statement of cash flows, which statement is CORRECT regarding the method of computing cash payments to suppliers?

• A)cost of goods sold plus an increase in inventory plus an increase in accounts payable.
• B)cost of goods sold less a decrease in inventory plus an increase in accounts payable.
• C)cost of goods sold plus a decrease in inventory plus an increase in accounts payable.
• D)cost of goods sold plus an increase in inventory less a decrease in accounts payable.

---

Definitions:

Natural Rate

The long-term unemployment rate that is observed once the effect of short-term cyclical factors has been removed, considered to be the rate of unemployment consistent with a stable rate of inflation.

Short-run Phillips Curve

A curve illustrating the inverse relationship between the rate of inflation and the rate of unemployment in an economy for a short-term period.

Expected Inflation

The rate at which consumers, businesses, and investors expect prices to rise over a future period.

Long-run Phillips Curve

The long-run Phillips Curve is an economic concept that illustrates the relationship between inflation and unemployment, suggesting that in the long run there is no trade-off between these two factors.