A Company Uses the Indirect Method to Prepare the Statement

question 121

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows.How will the adjustment to reflect the amount of cash received from customers be presented on the statement?

• A)The adjustment will be for the increase or decrease in accounts receivable for the period and will adjust net income in the operating activities section.
• B)The adjustment will be for the increase or decrease in accounts payable for the period and will adjust net income in the operating activities section.
• C)The adjustment will be for the increase or decrease in accrued expenses for the period and will adjust net income in the operating activities section.
• D)The adjustment will be for the increase or decrease in inventory for the period and will adjust net income in the operating activities section.

Recognize and describe the purposes and processes of closing entries in accounting.

Calculate ending capital based on given financial information.

Identify the steps in the process of closing income statement accounts.

Understand the effects of omitting or incorrectly recording closing entries.

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Definitions:

Promotional Deal

A marketing strategy that involves offering products or services at a reduced price or with added benefits for a limited time to stimulate demand or attract customers.

Discounts

Reductions from the full price of goods or services, often used as a promotional or sales incentive.

Robinson-Patman Act

A United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.

Price Discrimination

The practice of selling the same product or service at different prices to different customers, not based on differences in costs.