Assume a company uses the indirect method to prepare its statement of cash flows.If the supplies account increases and accounts payable decreases 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 payable is added to net income;the change in supplies is subtracted.
C)Both are subtracted from net income.
D)The change in supplies is added to net income;the change in accounts payable is subtracteD.Using the indirect method,both decreases in current assets and increases in current liabilities are added to net income to convert to cash flows from operating activities.

Question

Quizplus · Accepted Answer

An increase in the supplies account (a current asset) is subtracted from net income, and a decrease in accounts payable (a current liability) is also subtracted from net income when calculating cash flows from operating activities using the indirect method.

Assume a Company Uses the Indirect Method to Prepare Its