Virginia Company Uses the Indirect Method to Prepare the Statement

question 53

Multiple Choice

Virginia Company uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet: $\begin{array}{c}\text { Virginia Corp.}\\ \text { Comparative Balance Sheet}\\\text { December 31,2018 and 2017}\\\begin{array}{|l|r|r|r|}\hline&2018&2017&\text { Increase/(Decrease) }\\\hline \text { Accounts Payable } & \$ 4,000 & \$ 6,000 & \$(2,000) \\\hline \text { Accrued Liabilities } & 2,000 & 1,000 & 1,000 \\\hline \text { Long-term Notes Payable } & \underline{84,000} & \underline{90,000} & \underline{(6,000) } \\\hline \text { Total Liabilities } & \$ 90,000 & \$ 97,000 & \$(7,000) \\\hline \end{array}\end{array}$ How will the change in Accounts Payable be shown on the statement of cash flows?

• A) as an addition to Net Income
• B) as a deduction from Net Income
• C) as a deduction from investing cash flows
• D) as an addition to operating cash flows

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Definitions:

Short Run

A period in economics during which some resource inputs in a production process cannot be changed.

Profit-Maximizing

The process of adjusting production and pricing strategies to achieve the highest possible profit from business operations.

Marginal Revenue

The additional income produced from selling one more unit of a good or service.

Economic Profit

The difference between the total revenue generated by a business and its total costs, including both explicit and implicit costs.