Avatar Company uses the indirect method to prepare the cash flow statement.Please refer to the following section of the comparative balance sheet:
$\begin{array}{|l|r|r|r|}
\hline & {2017} &{2016} &{\text { Increase/decrease }} \
\hline \text { Accounts payable } & \$ 4000 & \$ 6000 & \$(2000) \
\hline \text { Accrued liabilities } & 2000 & 1000 & 1000 \
\hline \text { Long-term bills payable } & 84000 & 90000 & (6000) \
\hline \text { Total liabilities } & \$ 90000 & \$ 97000 & \$(7000)\\hline
\end{array}$ The change in accounts payable will be shown as a positive cash flow in the adjustments to Profit.

Question

Avatar Company uses the indirect method to prepare the cash flow statement.Please refer to the following section of the comparative balance sheet:
 $\begin{array}{|l|r|r|r|} 
\hline & {2017} &{2016} &{\text { Increase/decrease }} \
\hline \text { Accounts payable } & \$ 4000 & \$ 6000 & \$(2000) \
\hline \text { Accrued liabilities } & 2000 & 1000 & 1000 \
\hline \text { Long-term bills payable } & 84000 & 90000 & (6000) \
\hline \text { Total liabilities } & \$ 90000 & \$ 97000 & \$(7000)\\hline
\end{array}$ The change in accounts payable will be shown as a positive cash flow in the adjustments to Profit.

Quizplus · Accepted Answer

The decrease in accounts payable indicates that the company has paid off some of its liabilities, which results in a cash outflow, not a positive cash flow.

Avatar Company Uses the Indirect Method to Prepare the Cash