On January 1,Year 1,Colgate Corporation decided to switch from the direct method to the indirect method of preparing the statement of cash flows.Assuming a positive net income figure but a decrease in the cash balance,what can be said about the change in method of preparing the statement?
A)The direct method will yield a larger amount for cash flows from operating activities.
B)The only difference will be in the cash flows from financing activities section.
C)The indirect method will yield a larger amount for cash flows from operating activities.
D)There will be no difference in the totals on the statement of cash flows.

Question

Quizplus · Accepted Answer

The amount of net cash flow from operating activities is the same whether it is presented using the indirect or the direct method.

On January 1,Year 1,Colgate Corporation Decided to Switch from the Direct