A Company Uses the Indirect Method to Prepare the Statement

question 94

Multiple Choice

A company uses the indirect method to prepare the statement of cash flows.It presents the following amounts on its financial statements. $$\begin{array} { | l | r | r | } \hline & \text { End of this year } & \text { End of prior year } \\\hline \text { Accuunts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost af gouds sald } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventary } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary exgense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?

• A)The increase of $10,000 will be subtracted from sales revenue.
• B)The increase of $10,000 will be added to net income.
• C)The increase of $10,000 will be added to sales revenue.
• D)The increase of $10,000 will be subtracted from net income

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Definitions:

Capacity

The maximum amount that something can contain or the ability to perform, function, or produce effectively.

Sperling

A psychologist who conducted pioneering research on the capacity of sensory memory, using a technique that demonstrated the brief duration of iconic memory.

Information-processing

A cognitive approach that focuses on how people process, store, and retrieve information.

Serial Position Effect

A memory phenomenon where individuals are more likely to remember items at the beginning (primacy effect) and end (recency effect) of a list, than those in the middle.