Assume a Company Uses the Indirect Method to Prepare Its

question 29

Multiple Choice

Assume a company uses the indirect method to prepare its statement of cash flows.If the supplies account increases and accounts payable decreases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?

• A)Both are added to net income.
• B)The change in accounts payable is added to net income;the change in supplies is subtracted.
• C)Both are subtracted from net income.
• D)The change in supplies is added to net income;the change in accounts payable is subtracteD.Using the indirect method,both decreases in current assets and increases in current liabilities are added to net income to convert to cash flows from operating activities.

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