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

When using the direct method, changes in inventory are not reported as adjustments to net income, but are instead included in the calculation of cash flows from operating activities. The decrease in inventory of $18,000 will be subtracted from the cost of goods sold to determine the payments made to suppliers, which will be included in the operating activities section of the statement of cash flows.

A Company Uses the Direct Method to Prepare the Statement