Presented below is the Operating Activities section of the statement of cash flows for Feline Friends Corp.for 2017:$$\begin{array}{l}
\text { Operating activities: }\
\begin{array} { l r }
\text { Cash collected from customers } & \$ 165,000 \
\text { Cash payments for merchandise } & ( 83,000 ) \
\text { Cash payments for operating expenses } & \underline { ( 58,000 ) } \
\text { Net cash inflow from operating activities } & \$ 24,000
\end{array}
\end{array}$$ Which method of preparing the Operating Activities section has Feline used?

A)The direct method
B)The indirect method
C)Either method
D)Cannot be determined without further information

Question

Presented below is the Operating Activities section of the statement of cash flows for Feline Friends Corp.for 2017:$$\begin{array}{l}
\text { Operating activities: }\
\begin{array} { l r } 
\text { Cash collected from customers } & \$ 165,000 \
\text { Cash payments for merchandise } & ( 83,000 ) \
\text { Cash payments for operating expenses } & \underline { ( 58,000 ) } \
\text { Net cash inflow from operating activities } & \$ 24,000
\end{array}
\end{array}$$ Which method of preparing the Operating Activities section has Feline used?

A)The direct method
B)The indirect method
C)Either method
D)Cannot be determined without further information

Quizplus · Accepted Answer

The direct method is used here because the operating activities section explicitly lists cash receipts and payments, such as cash collected from customers and cash payments for merchandise and operating expenses.

Presented Below Is the Operating Activities Section of the Statement