Colorado Company uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: $\begin{array}{c}\text { Colorado Company }\\
\text { Comparative Balance Sheet }\
\text { December 31,2019 and 2018}\
\begin{array}{|l|c|c|c|}
\hline & 2018& 2017 & \text { Increase/(Decrease) } \
\hline \text { Accounts Payable } & \$ 4,000 & \$ 6,000 & \$(2,000) \
\hline \text { Accrued Liabilities } & 2,000 & 1,000 & 1,000 \
\hline \text { Long-term Notes Payable } & 84,000 & \$90,000& (6,000) \
\hline \text { Total Liabilities } & \$ 90,000 & \$ 97,000 & \$(7,000)\
\hline
\end{array}\end{array}$ How will the change in Accrued Liabilities be shown on the statement of cash flows?

Question

Quizplus · Accepted Answer

The increase in Accrued Liabilities indicates that expenses have been incurred but not yet paid in cash, which increases operating cash flows. Therefore, it is added to Net Income in the operating activities section of the cash flow statement.

Colorado Company Uses the Indirect Method to Prepare the Statement