If Inventory Decreases and Unearned Revenue Increase During an Accounting

question 8

Multiple Choice

If inventory decreases and unearned revenue increase during an accounting period while the indirect method is used,what does the company do with the changes in these accounts to calculate net cash flows from operating activities?

• A)Both are added to net income.
• B)The change in inventory is added to net income; the change in unearned revenue is subtracted.
• C)Both are subtracted from net income.
• D)The change in unearned revenue is added to net income; the change in inventory is subtracted.

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Definitions:

Supportive Organizational Culture

A company environment that promotes employee well-being, encouragement, and growth, facilitating a positive working atmosphere.

Social Organizational Scheme

A framework for understanding the structure and dynamics of social organizations and their hierarchical relationships.

Intuiting

The process of understanding or knowing something instinctively, without the need for conscious reasoning, often playing a role in decision-making.

Incubation

A period of subconscious processing that occurs between the time a problem is initially encountered and when it is eventually solved.