Question 29 2 pts Jason Company uses the indirect method to prepare the statemen

Question

Question 29 2 pts Jason Company uses the indirect method to prepare the statement of cash flows. The following amounts are shown in its December 31, 2015, financial statements. December 31, 2015 December 31, 2014 Accounts receivable $221,000 $200,000 Cost of goods sold $600,000 ales revenue $800,000 85,000 90,000 15,000 $ 55,000 65,000 125,000 10,000 48,000 Accounts payable Inventory Salaries payable Salaries expense How will the change in accounts payable be reported in the operating activities section of the statement of cash flows? O The increase of $20,000 will be subtracted from net income. The increase of $20,000 will be added to net income O The increase of $20,000 will be added to cost of goods sold. O The increase of $20,000 will be subtracted from cost of goods sold.

Explanation / Answer

The correct option is B.

A decrease in current liabilities is an outflow of cash and hence subtracted from net income for computating cash flow from operating activities.Similarly an increase in current liabilities is added to net income for computing cash flow from operations.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.