A Company Uses the Direct Method to Prepare the Statement

question 55

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 salaries payable in the operating activities category of the cash flow statement?

• A)The increase of $10,000 will be subtracted from salary expense to determine payments to employees.
• B)The increase of $10,000 will be subtracted from net income.
• C)The increase of $10,000 will be added to salary expense to determine payments to employees.
• D)The increase of $10,000 will be added to net income.

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Definitions:

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Investment

The allocation of resources, usually financial, in expectation of future returns, such as income or capital gains.

Nominal Interest Rate

The stated interest rate on a loan or investment, not adjusted for inflation.

Inflation Rate

The rate expressed in percentage terms by which the overall price level of goods and services increases, leading to a decrease in purchasing power.