The comparative balance sheets of Midnite Corp.for 2018 and 2017 indicate that short-term trade notes receivable increased from $5,000 in 2016 to $75,000 in 2018.How will this change be reported on Midnite's statement of cash flows,if Midnite uses the indirect method?
A)It will be included in the amount of cash and cash equivalents at the end of 2018.
B)It will be reported as a deduction from net income in the Operating Activities section.
C)It will be reported as a cash outflow in the Investing Activities section.
D)It will be added to net income in the Operating Activities section.

Question

Quizplus · Accepted Answer

An increase in short-term trade notes receivable represents cash that was not collected and thus reduces the cash flow from operating activities. In the indirect method, this increase is deducted from net income to reconcile it to net cash provided by operating activities.

The Comparative Balance Sheets of Midnite Corp