In its 2016 income statement,WME reported $440,000 for the cost of goods sold.WME paid inventory suppliers $380,000 in 2016,and its inventory balance decreased by $41,000 during the year.In its reconciliation schedule,WME should:
A)Show a $19,000 positive adjustment to net income under the indirect method for the increase in accounts payable.
B)Show a $19,000 positive adjustment to net income under the indirect method for the decrease in accounts payable.
C)Show a $19,000 negative adjustment to net income under the indirect method for the increase in accounts payable.
D)Show a $19,000 negative adjustment to net income under the indirect method for the decrease in accounts payable.

Question

Quizplus · Accepted Answer

The decrease in inventory ($41,000) and the difference between the cost of goods sold ($440,000) and payments to suppliers ($380,000) indicate an increase in accounts payable of $19,000, which is a positive adjustment to net income under the indirect method.

In Its 2016 Income Statement,WME Reported $440,000 for the Cost