Inventory and Accounts Payable Increase During the Accounting Period

question 23

Multiple Choice

Inventory and accounts payable increase during the accounting period.What is done with these changes to determine the net cash flow from operating activities when the direct method is used?

• A)The changes in each account are both added to net income.
• B)The change in inventory is subtracted from cost of goods sold and the change in accounts payable is added to cost of goods sold to find the cash paid to suppliers.
• C)The changes in each account are both subtracted from net income.
• D)The change in inventory is added to cost of goods sold and the change in accounts payable is subtracted from cost of goods sold to find the cash paid to suppliers.

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