Presented below is the Operating Activities section of the statement of cash flows for Golden Consulting for 2017: $\text { Operating activities: }$
$\begin{array}{lr}
\text { Net income } & \$ 92,000 \
\text { Add: Depreciation } & 20,000 \
\text { Decrease in accounts receivable } & 8,000 \
\hline &\$120,000\
\text { Deduct: Decrease in accounts payable }&(6,000)\
\text { Net cash inflow from operating activities }&\$114,000
\end{array}$Which method of preparing the Operating Activities section has Golden Consulting used?

A)The direct method
B)The indirect method
C)Either method
D)Cannot be determined without further information

Question

Presented below is the Operating Activities section of the statement of cash flows for Golden Consulting for 2017: $\text { Operating activities: }$
$\begin{array}{lr}
\text { Net income } & \$ 92,000 \
\text { Add: Depreciation } & 20,000 \
\text { Decrease in accounts receivable } & 8,000 \
\hline &\$120,000\
\text { Deduct: Decrease in accounts payable }&(6,000)\
\text { Net cash inflow from operating activities }&\$114,000
\end{array}$Which method of preparing the Operating Activities section has Golden Consulting used?

A)The direct method
B)The indirect method
C)Either method
D)Cannot be determined without further information

Quizplus · Accepted Answer

Golden Consulting has used the indirect method for preparing the Operating Activities section of the cash flow statement. This is indicated by the adjustments made to net income for non-cash items (like depreciation) and changes in working capital accounts (like accounts receivable and accounts payable).

Presented Below Is the Operating Activities Section of the Statement Operating activities: \text { Operating activities: } Operating activities:

Presented Below Is the Operating Activities Section of the Statement $\text { Operating activities: }$