Krech Corporation's Comparative Balance Sheet Appears Below

question 115

Multiple Choice

Krech Corporation's comparative balance sheet appears below:
The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It did not sell or retire any property, plant, and equipment during the year. The company uses the indirect method to determine the net cash provided by operating activities.
-Which of the following is correct regarding the operating activities section of the statement of cash flows?

• A) The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be subtracted from net income
• B) The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be added to net income
• C) The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be subtracted from net income
• D) The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be added to net income

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues, indicating the company's actual profit.

IFRS

Worldwide, the International Financial Reporting Standards serve as the accounting framework for drafting financial statements.

Single-Step Approach

A simple method of presenting an income statement where all revenues are summed in a single step before subtracting all expenses to find the net income.

Multiple-Step Approach

An income statement preparation method that highlights several steps or stages in determining net income, including operating and non-operating sections.