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 payable?

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 payable?

Quizplus · Accepted Answer

The increase in accounts payable indicates that the company has delayed cash payments for inventory, which means less cash was used than the cost of goods sold reported. Therefore, the $8,000 increase is added to net income in the operating activities section.

A Company Uses the Indirect Method to Prepare the Statement