Qtopia Company Uses the Direct Method to Prepare Its Statement

question 136

True/False

Qtopia Company uses the direct method to prepare its statement of cash flows. It has reported Cost of goods sold of $70,000 on its income statement for the year 2012. If the balance in the inventory account has gone up by $2,000 during the year, then $2,000 will have to be added to $70,000 as part of the process to calculate payments to suppliers for inventory purchases.

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Definitions:

Life Insurance Policy

A contract between an insurance policyholder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.

Journal Entry

A record in accounting that notes a specific financial transaction in the books, involving a debit and a credit.

Sacred Church

A holy and revered institution or place of worship affiliated with a particular religion or belief system.

Charge And Discharge Statement

A financial report detailing the charges or debits against an account and the credits or payments made to it, often used in the context of trust accounts or estates to show activities over a period.