Assume the Direct Method Is Used to Compute Net Cash

question 19

Multiple Choice

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Accounts Payable-indicate the effect on cash payments for purchases by choosing one of the following:

• A)Add to Cost of Goods Sold to compute cash payments for purchases.
• B)Subtract from Cost of Goods Sold to compute cash payments for purchases.
• C)Not used to adjust Cost of Goods Sold to compute cash payments for purchases.

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Definitions:

Income-Transfer Payments

Transfers of money from the government to individuals without any expectation of work or goods and services in return, often aimed at redistributing wealth.

Government Purchases

Expenditures by government entities on goods and services for current use to directly satisfy individual or collective needs.

Military Hardware

Physical, tangible equipment and weapons used by armed forces, such as tanks, aircraft, and ships.

Public Finance

The study of government revenue (taxation) and government expenditure policies and their impact on the economy.