A Company Uses the Direct Method to Prepare the Statement

question 110

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 accounts receivable in the operating activities category of the cash flow statement?

• A)The increase of $17,000 will be subtracted from net income.
• B)The increase of $17,000 will be subtracted from sales to determine cash received from customers.
• C)The increase of $17,000 will be added to sales to determine cash received from customers.
• D)The increase of $17,000 will be added to net income.

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Definitions:

Express Agreement

A contract wherein the terms and conditions are stated clearly and explicitly by the parties involved.

Implied Agreement

A contract formed by actions of the parties that indicate a mutual intent to agree, rather than through written or spoken words.

Partnership Term

The duration or length of time during which a partnership agreement is effective or operational.

Personal Debts

Financial obligations or amounts owed by individuals as opposed to businesses or governments.