Exhibit 12-4
Manning Company Uses the Indirect Method to Prepare

question 36

Multiple Choice

Exhibit 12-4
Manning Company uses the indirect method to prepare the statement of cash flows.The following amounts are shown in its December 31,2017,financial statements.
$$\begin{array} { l c c } & \text { December 31, } 2017 & \text { December 31, 2016 } \\ \text { Accourts receivable } & \$ 663,000 & \$ 600,000 \\\text { Cost of goods sold } & \$ 1,800,000 & \\\text { Sales reveruse } & \$ 2,400,000 & \\\text { Accourts payable } & \$ 255,000 & \$ 195,000 \\\text { Irventory } & \$ 270,000 & \$ 375,000 \\\text { Salaries payable } & \$ 45,000 & \$ 30,000 \\\text { Salaries expense } & \$ 165,000 & \$ 144,000\end{array}$$
-Refer to Exhibit 12-4.How will the change in salaries payable be reported in the operating activities section of the statement of cash flows?

• A)The increase of $15,000 will be added to net income.
• B)The increase of $15,000 will be subtracted from cost of goods sold.
• C)The increase of $15,000 will be subtracted from net income.
• D)The increase of $15,000 will be added to sales revenue.
• E)None of the answer choices is correct.

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Definitions:

Innovation

The process of creating new ideas, products, or methods that bring something novel to the market or society.

Marginal Utility

The additional contentment or value obtained by consuming one more unit of a good or service.

Utility-maximizing Combination

is a selection of goods and services that provides the highest level of satisfaction or utility to an individual, given their budget constraints.

Total Utility

The total satisfaction received from consuming a particular amount of goods or services.