Avatar Company Uses the Indirect Method to Prepare Its Statement

question 149

Multiple Choice

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: Which of the following statements would be TRUE?

• A)There was zero net cash flow from transactions involving common stock.
• B)There was a negative cash flow of $28,000 from the issuance of common stock.
• C)There was a positive cash flow of $28,000 from the issuance of common stock.
• D)There was positive cash flow of $30,000 from issuance of common stock.

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Definitions:

Labor

Refers to human effort, both physical and mental, used in the production of goods and services.

Output

Output is the quantity of goods or services produced by a company, industry, or economy within a specified period.

Average Product

The output per unit of input, calculated by dividing total output by the quantity of inputs.

Law of Diminishing Returns

An economic principle stating that as additional units of a factor of production are added to a fixed amount of another factor, the incremental increase in output will eventually decrease.