During Year 6, Delta Company had a net $4,000 increase in customer advances.The T-account work sheet for preparing the statement of cash flows
A)subtracts this excess from net income in deriving cash flow from operating activities.
B)adds this excess to net income in deriving cash flow from financing activities.
C)adds this excess to net income in deriving cash flow from operating activities.
D)subtracts this excess from net income in deriving cash flow from financing activities.
E)subtracts this excess from retained earnings in deriving cash flow from operating activities.

Question

Quizplus · Accepted Answer

Customer advances are considered a component of operating cash flows, so they should be added to net income in deriving cash flow from operating activities. Therefore, the $4,000 increase in customer advances should be added to the net income to derive the cash flow from operating activities.

During Year 6, Delta Company Had a Net $4,000 Increase