In preparing a statement of cash flows using the indirect method,a decrease in an unearned revenue account should
A)be shown as a financing activity.
B)be shown as a deduction from net income in computing net cash flows from operating activities.
C)not be shown on the statement of cash flows.
D)be shown as an addition to net income in computing net cash flows from operating activities.

Question

Quizplus · Accepted Answer

A decrease in an unearned revenue account indicates that revenue has been recognized, which means cash was received in a prior period. Therefore, it should be deducted from net income in the operating activities section to adjust for the revenue that was recognized without a cash inflow in the current period.

In Preparing a Statement of Cash Flows Using the Indirect