Answer the following statements true (T) or false (F)
1. The direct method of reporting cash flows from operating activities provides clearer information about the sources and uses of cash than does the indirect method.
2. Most public companies use the indirect method to prepare their statement of cash flows because it is the method the FASB prefers.
3. Tri-City Installations Company uses the direct method to prepare its statement of cash flows. Tri-City has reported sales revenues of $200,000 on its income statement for 2018. If the balance in Accounts Receivable has increased by $10,000 during the year, then $10,000 needs to be added to $200,000 to calculate collections from customers.
4. Urban Installations Company uses the direct method to prepare its statement of cash flows. Urban has reported cost of goods sold of $95,000 on its income statement for 2018. If the balance in the Merchandise Inventory account decreased by $6,000 during the year, then $6,000 needs to be added to $95,000 to calculate payments to suppliers for inventory purchases.
1. TRUE
2. FALSE
3. FALSE
4. FALSE
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Answer the following statement true (T) or false (F)