A Company Uses the Direct Method to Prepare the Statement

question 108

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 inventory in the operating activities category of the cash flow statement?

• A)The decrease of $25,000 will be subtracted from net income.
• B)The decrease of $25,000 will be added to net income.
• C)The decrease of $25,000 will be subtracted from cost of goods sold to determine payments to suppliers.
• D)The decrease of $25,000 will be added to cost of goods sold to determine payments to suppliers.

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Definitions:

Decision-Making

The cognitive process of selecting a course of action among several alternatives to achieve a desired objective.

Spotlight Question

A probing question designed to uncover deep insights, typically used to focus attention on specific issues during discussions or interviews.

Implied Warranty

A legal guarantee that a product will meet a minimum level of quality and functionality, assumed in a sale even if not expressly stated.

Express Warranty

An explicit guarantee by a seller regarding the condition, quality, or performance of the product being sold.