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Assume the Indirect Method Is Used to Compute Cash Flows

Question 161

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Assume the indirect method is used to compute cash flows from operations. For each item listed below, indicate the effect on net income in arriving at cash flows from operations

Premises:
Increase in accounts receivable
Increase in inventory
Decrease in prepaid expenses
Decrease in accounts payable
Increase in accrued liabilities
Increase in income taxes payable
Depreciation expense
Loss on sale of investment
Gain on disposal of equipment
Amortization expense
Responses:
Add to Net Income
Deduct from Net Income

Correct Answer:

Increase in accounts receivable
Increase in inventory
Decrease in prepaid expenses
Decrease in accounts payable
Increase in accrued liabilities
Increase in income taxes payable
Depreciation expense
Loss on sale of investment
Gain on disposal of equipment
Amortization expense
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