Krech Corporation's Comparative Balance Sheet Appears Below: the Company's

question 58

Multiple Choice

Krech Corporation's comparative balance sheet appears below: The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.It did not sell or retire any property,plant,and equipment during the year.The company uses the indirect method to determine the net cash provided by operating activities. Which of the following is correct regarding the operating activities section of the statement of cash flows?

• A)The change in Prepaid Expenses will be added to net income;The change in Income Taxes Payable will be subtracted from net income
• B)The change in Prepaid Expenses will be subtracted from net income;The change in Income Taxes Payable will be subtracted from net income
• C)The change in Prepaid Expenses will be subtracted from net income;The change in Income Taxes Payable will be added to net income
• D)The change in Prepaid Expenses will be added to net income;The change in Income Taxes Payable will be added to net income

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Definitions:

Purchase Price

The amount of money paid to buy goods or services.

Merchandise Inventory

Goods or products that a retailer or wholesaler has purchased and intends to sell to customers.

Periodic System

An inventory system where inventory levels are updated in the accounting records on a periodic basis, typically at the end of an accounting period, rather than after each purchase or sale.

LIFO Method

The "Last In, First Out" inventory valuation method, where the most recently produced items are recorded as sold first.