A Company Uses the Direct Method to Prepare the Statement

question 126

Multiple Choice

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

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

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