Assume the Direct Method Is Used to Compute Net Cash

question 16

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 Receivable-indicate the effect on cash receipts from sales by choosing one of the following:

• A)Add to Sales to arrive at cash receipts from sales.
• B)Subtract from Sales to arrive at cash receipts from sales.
• C)Not used to adjust Sales to arrive at cash receipts from sales.

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Definitions:

Commerce Clause

A provision of the U.S. Constitution (Article I, Section 8, Clause 3) that gives Congress the power to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.

Import-Export Clause

A provision in the United States Constitution that prohibits states from imposing taxes or duties on imports and exports, with certain exceptions.

Tax

A mandatory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.

Police Power

The capacity of a state to regulate behavior and enforce order within its territory for the betterment of the health, safety, morals, and general welfare of its inhabitants.