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

question 63

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

• A)The increase of $60,000 will be subtracted from sales revenue.
• B)The increase of $60,000 will be added to net income.
• C)The increase of $60,000 will be added to sales revenue.
• D)The increase of $60,000 will be subtracted from net income.
• E)None of the answer choices is correct.

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Definitions:

Capital Losses

The loss incurred when a capital asset is sold for less than its original purchase price.

Endowment Funds

Long-term funds established by donations that are meant to support a particular organization or cause, where the principal remains intact and the investment income is used for specific purposes.

Investment Time Horizon

The length of time an investor expects to hold an investment before taking the money out.

Pension Liability

The amount of money a company or governmental entity is required to pay into its pension plan to satisfy future pension obligations to retired employees.