A Company Uses the Indirect Method to Prepare the Statement

question 121

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows. It presents the following data on its financial statements: *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?

• A)The decrease of $18,000 will be subtracted from net income.
• B)The decrease of $18,000will be subtracted from cost of goods sold.
• C)The decrease of $18,000 will be added to net income.
• D)The decrease of $18,000 will be added to cost of goods sold.

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Definitions:

Sherman Act

The Sherman Act is landmark federal legislation passed in 1890 aimed at promoting fair competition for the benefit of consumers by prohibiting monopolies and restrictive trade practices.

Franchise

A type of license that a party (franchisee) acquires to allow them to have access to a business's (franchisor's) proprietary knowledge, processes, and trademarks in order to allow the party to sell a product or provide a service under the business's name.

Tying Arrangement

A business practice where the sale of one product is linked to the compulsory purchase of another, often scrutinized under antitrust laws.

Tying Arrangement

A business practice where the sale of one product or service is conditioned on the purchase of another product or service.