Rick Corporation's Accounts Receivable decreased by $25,000 during the year.What is the adjustment to the cash flow statement when it is prepared by the indirect method?
A)Subtract the decrease from the net income in operating activities.
B)Add the decrease to the net income in operating activities.
C)Add the decrease in the investing activities section.
D)Subtract the decrease in the financing activities.

Question

Quizplus · Accepted Answer

When the Accounts Receivable decreases, it means cash has been received from customers, which should be added to the net income in the operating activities section of the cash flow statement. Therefore, the adjustment should be to add the decrease to the net income in operating activities.

Rick Corporation's Accounts Receivable Decreased by $25,000 During the Year