Assume a company uses the indirect method to prepare its statement of cash flows.If Accounts Receivable decreases and Unearned Revenue increases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?
A)Both are added to net income.
B)The change in accounts receivable is added to net income;the change in unearned revenue is subtracted.
C)Both are subtracted from net income.
D)The change in unearned revenue is added to net income;the change in accounts receivable is subtracted.

Question

Quizplus · Accepted Answer

Decreases in current assets (Accounts Receivable)and increases in current liabilities (Unearned Revenue)are added to convert net income to cash flows from operating activities.

Assume a Company Uses the Indirect Method to Prepare Its