A Company Uses the Indirect Method to Prepare the Statement

question 174

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 salary payable?

• A)The decrease of $9000 will be added to net income.
• B)The decrease of $9000 will be added to cost of goods sold.
• C)The decrease of $9000 will be subtracted from cost of goods sold.
• D)The decrease of $9000 will be subtracted from net income.

---

Definitions:

Implied Contract

An agreement derived from the actions or circumstances of the parties involved, rather than explicit words.

Objective Theory Of Contracts

A theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions. Objective facts might include what a party said when entering into the contract, how a party acted or appeared, and the circumstances surrounding the transaction.

Express Contract

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

Express Contract

A legally-binding agreement in which the terms are explicitly stated by the parties involved either orally or in writing.