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:

Certain Income

Certain income refers to a guaranteed or fixed amount of earnings that an individual or entity can expect to receive over a period.

Uncertain Income

Uncertain income refers to earnings that fluctuate and are not guaranteed, often associated with irregular work or investment returns.

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Marginal Utility

The added gratification or usefulness experienced from the consumption of an additional unit of a good or service.