The comparative balance sheets of Apollo Rocket,Inc.show a net increase in inventory of $79,000 and a net decrease in accounts payable of $42,000 during 2015.In computing net cash flow from operating activities under the indirect method,net income for 2015 should be:
A)Increased by $37,000.
B)Reduced by $37,000.
C)Increased by $121,000.
D)Reduced by $121,000.

Question

Quizplus · Accepted Answer

An increase in inventory is a use of cash, reducing cash flow by $79,000. A decrease in accounts payable is also a use of cash, reducing cash flow by $42,000. Together, these reduce net income by $121,000 in the cash flow statement.

The Comparative Balance Sheets of Apollo Rocket,Inc