Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities when using the indirect method?
A)A decrease in accounts receivable will be added to net income.
B)An increase in inventory will be added to net income.
C)An increase in accounts payable will be added to net income.
D)Amortization of bond premium will be deducted from net income.

Question

Quizplus · Accepted Answer

An increase in inventory is considered a use of cash and should be subtracted from net income, not added, when adjusting net income to determine cash flows from operating activities using the indirect method.

Which of the Following Statements Does Not Correctly Describe an Adjustment