A Company Uses the Direct Method to Prepare the Statement

question 88

Multiple Choice

A company uses the direct method to prepare the statement of cash flows.How will the amount of cash purchases of inventory be computed?

• A)The amount of cash purchases of inventory is computed as cost of goods sold plus ending inventory.
• B)The amount of cash purchases of inventory is computed as cost of goods sold plus ending inventory plus beginning inventory.
• C)The amount of cash purchases of inventory is computed as cost of goods sold plus ending inventory minus beginning inventory.
• D)The amount of cash purchases of inventory is computed as beginning inventory minus ending inventory minus cost of goods sold.

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Definitions:

Authorized

Having legal or official approval to do something.

Shareholder Approval

The process by which a company's shareholders give consent to certain decisions or actions proposed by the company's board of directors, often requiring a vote.

Merger Plan

A strategic proposal for combining two or more companies into a single entity to achieve business benefits.

Pre-merger Market Values

The valuation of companies before they undergo a merger, factoring in stock prices, assets, and overall financial health.