Assume that the indirect method is used to determine net cash provided by (used in)operating activities and that Accounts Receivable balance decreased by $10 million during the year.That $10 million should be:
A)added to net income.
B)subtracted from net income.
C)added to investing activities.
D)subtracted from investing activities.

Question

Quizplus · Accepted Answer

Accounts Receivable increases when sales are made on account and it decreases when cash is collected from customers.An overall increase in this account,then,implies that cash collections were less than sales on account.To convert from the higher sales number that is included in net income to the lower cash collected from customers,we subtract the difference ($10 million).

Assume That the Indirect Method Is Used to Determine Net