If the Direct Method Is Used to Prepare a Statement

question 15

Multiple Choice

If the direct method is used to prepare a statement of cash flows,the cost of goods sold from the income statement will be adjusted

• A)for changes in inventory to arrive at net purchases.
• B)for changes in accounts payable to arrive at cash payments for purchases.
• C)Both of these choices.

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Definitions:

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time.

Order Paper

A negotiable instrument that is payable to a specific person or their order, allowing the transfer of ownership through endorsement.

Special Indorsement

An endorsement on a negotiable instrument that specifies the person to whom, or to whose order, the instrument can be paid.

Blank Indorsement

A type of endorsement on a negotiable instrument where the endorser does not specify an endorsee, making it payable to the bearer.