When Preparing the Operating Section of the Statement of Cash

Multiple Choice

When preparing the operating section of the statement of cash flows using the direct method, which of the following statements is true?

A) An increase in accounts payable is subtracted from cost of goods sold.
B) An increase in accounts receivable is added to sales.
C) Depreciation expense is added to cash flows.
D) Gains on sales of long term assets are subtracted from cash flows.