Qtopia Company Uses the Direct Method to Prepare Its Statement

question 91

True/False

Qtopia Company uses the direct method to prepare its statement of cash flows. It has reported Cost of Goods Sold of $85,000 on its income statement for the year 2015. If the balance in Accounts Payable, for inventory suppliers only, has gone down by $8,000 during the year, then $8,000 will have to be subtracted from $85,000 as part of the process to calculate payments to suppliers for inventory purchases.

---

Definitions:

Time-Sales Finance

Financing arrangements that allow consumers to purchase goods or services over time, typically involving installment payments.

Installment Contract

A legal agreement requiring regular payments over time for the purchase of goods or services, typically used for expensive items.

Conditional Sales Contracts

Agreements where the sale is contingent upon certain conditions, often used in transactions involving goods or property.

Purchased Equipment

Machinery or tools acquired by a business for use in its operations, representing capital expenditure and an enhancement of operational capacities.