Utah Corp Uses the Indirect Method to Prepare the Statement of of Cash

question 149

Multiple Choice

Utah Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: $\begin{array}{c}\text {Utah Corp.}\\\text {Comparative Balance Sheet}\\\text {December 31,2018 and 2017}\\\begin{array}{|l|c|c|c|}\hline & 2019 & 2018 & \text { Increase/(Decrease) } \\\hline \text { Cash } & \$ 45,000 & \$ 27,000 & \$ 18,000 \\\hline \text { Accounts Receivable } & 48,000 & 45,000 & 3,000 \\\hline \text { Merchandise Inventory } & \underline{180,000} & \underline{132,000} & \underline{48,000} \\\hline \text { Total Assets } & \$ 273,000 & \$ 204,000 & \$ 69,000 \\\hline\end{array}\end{array}$ How will the change in Merchandise Inventory be shown on the statement of cash flows?

• A) addition to net income under the operating activities section
• B) subtraction from net income under the operating activities section
• C) positive cash flow under the financing activities section
• D) negative cash flow under the investing activities section

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