Brandon, Inc.had a $1,000 increase in accounts payable during the year.Which of the following will appear on the statement of cash flows prepared using the indirect method?
A)Do not include the $1,000 in the statement of cash flows but show it in an accompanying schedule of non-cash transactions.
B)Add $1,000 to net income in order to arrive at net cash provided by operating activities.
C)Deduct $1,000 from net income in order to arrive at net cash provided by operating activities.
D)Deduct $1,000 to arrive at net cash flows from investing activities.

Question

Quizplus · Accepted Answer

An increase in accounts payable indicates that the company has more cash available because it has not yet paid out that cash. Therefore, when preparing the statement of cash flows using the indirect method, this increase is added to net income to adjust for the fact that it did not affect the company's cash balance during the period.