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.

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Definitions:

Statistical Probability

The likelihood of an event occurring based on a mathematical model, often expressed as a number between 0 and 1.

T-test

A statistical test used to compare the means of two groups to determine if they come from the same population.

Alpha

A predetermined threshold in hypothesis testing that defines the probability of making a Type I Error, usually set at 0.05, indicating a 5% risk of false positive.

Null Hypothesis

A hypothesis that suggests there is no significant difference or effect, serving as a default position until evidence suggests otherwise.