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

question 16

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 accounts receivable be reported in the operating activities section of the statement of cash flows?

• A)The increase of $63,000 will be subtracted from net income.
• B)The increase of $63,000 will be subtracted from sales revenue.
• C)The increase of $63,000 will be added to net income.
• D)The increase of $63,000 will be added to sales revenue.
• E)None of the answer choices is correct.

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Definitions:

Downward-Sloping Demand

A situation in economics where demand for a commodity decreases as the price increases, according to the law of demand.

No Monopoly Power

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Monopolistically Competitive

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