A Company Uses the Indirect Method to Prepare the Statement

question 20

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
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What will appear in the operating activities section related to inventory?

• A)The decrease of $19,000 will be subtracted from net income.
• B)The decrease of $19,000 will be subtracted from cost of goods sold.
• C)The decrease of $19,000 will be added to cost of goods sold.
• D)The decrease of $19,000 will be added to net income.

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Definitions:

Civilization

A complex society characterized by the development of forms of government, social stratification, urbanization, and symbolic systems of communication such as writing.

Agricultural Practices

Methods and techniques used in farming to cultivate plants and raise animals for food, fiber, and other products.

Catholicism

A branch of Christianity headed by the Pope and characterized by its traditions and form of liturgy based on the Seven Sacraments.

Fishing Trade

The industry or business of catching, processing, and selling fish and seafood.