A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its financial statements. *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?

Question

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its financial statements.  *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?

Quizplus · Accepted Answer

Under the direct method, inventory is accounted for in the operating activities section by adjusting the cost of goods sold. In this case, the decrease in inventory of $20,000 will be subtracted from the cost of goods sold, which will result in a higher cash outflow to suppliers. Therefore, choice C is the correct answer.

A Company Uses the Direct Method to Prepare the Statement