Assume That the Balance of Accounts Payable Does Not Change

question 29

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 cost of goods sold under the direct 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:

Ownership

The legal right to possess, use, control, and dispose of property, assets, or resources.

Seniority

The status obtained by an employee based on length of service or tenure, often affecting promotions, layoffs, and other job-related benefits.

Personal Property

Moveable property that is not fixed permanently to one location, such as furniture, vehicles, and electronic goods, as opposed to real estate.

Ownership Rights

Legal entitlements associated with possessing property, including the rights to use, rent, sell, or transfer it.