Assume That the Balance of Accounts Payable Does Not Change

question 13

Multiple Choice

Assume that the balance of accounts payable does not change during a period.When preparing a statement of cash flows,an increase in ending inventory over beginning inventory will result in an adjustment to net income under the indirect approach because

• A)the amount of cost of goods sold is equal to the amount of cash paid for purchases.
• B)consumed inventory is an expense but not a use of funds.
• C)the amount of cost of goods sold on an accrual basis is less than the amount of cash paid for purchases of inventory.
• D)the amount of cash paid for purchases of inventory is less than the amount of cost of goods sold on an accrual basis.

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Definitions:

Terminated

Ended or concluded, often referring to the cessation of employment, contracts, or legal agreements.

Obligations

Duties or responsibilities imposed by law, contract, or one's conscience.

Discharged

Released or freed from a legal, financial, or other obligation.

Concurrent Conditions

Circumstances where two or more conditions must occur at the same time for a contract or agreement to be fully enforceable.