A company uses the indirect method to prepare the statement of cash flows.It presents the following amounts on its financial statements. $$\begin{array} { | l | r | r | }
\hline & \text { End of this year } & \text { End of prior year } \
\hline \text { Accuunts receivable } & \$ 110,000 & \$ 100,000 \
\hline \text { Cost af gouds sald } & 560,000 & \
\hline \text { Sales revenue } & 830,000 & \
\hline \text { Accounts payable* } & 75,000 & 67,000 \
\hline \text { Inventary } & 86,000 & 105,000 \
\hline \text { Salary payable } & 13,000 & 10,000 \
\hline \text { Salary exgense } & 49,000 & 45,000 \
\hline
\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?

Question

A company uses the indirect method to prepare the statement of cash flows.It presents the following amounts on its financial statements. $$\begin{array} { | l | r | r | } 
\hline & \text { End of this year } & \text { End of prior year } \
\hline \text { Accuunts receivable } & \$ 110,000 & \$ 100,000 \
\hline \text { Cost af gouds sald } & 560,000 & \
\hline \text { Sales revenue } & 830,000 & \
\hline \text { Accounts payable* } & 75,000 & 67,000 \
\hline \text { Inventary } & 86,000 & 105,000 \
\hline \text { Salary payable } & 13,000 & 10,000 \
\hline \text { Salary exgense } & 49,000 & 45,000 \
\hline
\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?

Quizplus · Accepted Answer

Under the indirect method, the change in accounts receivable is added to net income. Therefore, the increase of $10,000 in accounts receivable will be subtracted from net income in the operating activities section.

A Company Uses the Indirect Method to Prepare the Statement