Salaries payable decreased from 2009 to 2010.Using the indirect method (statement of cash flows),the decrease should be:

Question

Quizplus · Accepted Answer

According to the indirect method of preparing the statement of cash flows, changes in current assets and liabilities are adjusted to net income to derive the operating cash flows. A decrease in salaries payable is a reduction in a current liability, and as such, it should be subtracted from net income to reflect the actual cash paid for salaries. Therefore, the correct choice is A, which says the decrease should be subtracted from net income.

Salaries Payable Decreased from 2009 to 2010