Q 23.28: When preparing its statement of cash flows, a firm discovers that its accounts receivable balance has decreased over the course of the period. Given this information, which of the following statements is accurate? A : If the firm is using the direct method, this discovery should lead to an upward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to an upward adjustment when calculating cash flow from operating activities. B : If the firm is using the direct method, this discovery should lead to an upward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to a downward adjustment when calculating cash flow from operating activities. C : If the firm is using the direct method, this discovery should lead to a downward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to a downward adjustment when calculating cash flow from operating activities. D : If the firm is using the indirect method, this discovery should lead to an upward adjustment when calculating cash flow from operating activities. If it is using the direct method, this discovery should lead to a downward adjustment when calculating cash receipts for customers.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Q 23.28:

When preparing its statement of cash flows, a firm discovers that its accounts receivable balance has decreased over the course of the period. Given this information, which of the following statements is accurate?

A :

If the firm is using the direct method, this discovery should lead to an upward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to an upward adjustment when calculating cash flow from operating activities.
B :

If the firm is using the direct method, this discovery should lead to an upward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to a downward adjustment when calculating cash flow from operating activities.
C :

If the firm is using the direct method, this discovery should lead to a downward adjustment when calculating cash receipts for customers. If it is using the indirect method, this discovery should lead to a downward adjustment when calculating cash flow from operating activities.
D :

If the firm is using the indirect method, this discovery should lead to an upward adjustment when calculating cash flow from operating activities. If it is using the direct method, this discovery should lead to a downward adjustment when calculating cash receipts for customers.

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