Caesario Company's Accounts Receivable increased by $35,000 and their Accounts Payable decreased by $18,000.What is the net effect on cash from operations under the indirect method?

Question

Quizplus · Accepted Answer

Under the indirect method, an increase in accounts receivable is subtracted from net income as it represents a use of cash, while a decrease in accounts payable is added to net income as it represents a source of cash. 
Therefore, the net effect on cash from operations would be: 
$35,000 (increase in accounts receivable) - $18,000 (decrease in accounts payable) = $17,000 decrease in cash from operations. 
Since the question is asking for the net effect on cash, the answer is negative, which means a decrease in cash from operations. 
Hence, the correct answer is C) -$53,000.

Caesario Company's Accounts Receivable Increased by $35,000 and Their Accounts