Martinez Company Uses the Direct Method to Prepare Its Statement

question 50

True/False

Martinez Company uses the direct method to prepare its statement of cash flows. It has reported Cost of Goods Sold of $95,000 on its income statement for the year 2015. If the balance in the Inventory account has gone down by $6,000 during the year, then $6,000 will have to be added to $95,000 as part of the process to calculate payments to suppliers for inventory purchases.

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Definitions:

Excess Land Allocation

The process of assigning a portion of the purchase price of a combined investment in land and building to the land, often when the portion allocated is above the fair value.

Noncontrolling Interest

An ownership interest in a company that is less than 50%, indicating that the holder does not have control over the company's operations.

Book Value

The net value of a company's assets minus its liabilities and intangible assets, often used to estimate a company's net worth.

Controlling Interest

The ownership of a sufficient portion of a company's stock to influence its direction, typically through more than 50% of voting shares.