The Following Information Is Reported in the Operating Activities Section

Multiple Choice

The following information is reported in the operating activities section of Gateway's statement of cash flows for 2016: $\begin{array}{lr}\text { Net income } & \$ 1,200,000 \\\text { Decrease in inventories } & 600,000 \\\text { Decrease in accounts payable } & 400,000\end{array}$ ? Which one of the following conclusions can be assumed from the information provided?

A) Gateway purchased more merchandise than it sold in 2016.
B) Cash payments for merchandise exceeded cost of goods sold by $200,000.
C) Gateway used the direct method to determine cash flows from operating activities.
D) Cash payments for merchandise purchases were less than the amount of merchandise purchased on credit during 2016.