Colorado Company Uses the Indirect Method to Prepare the Statement

question 38

Multiple Choice

Colorado Company uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet: $\begin{array}{c}\text { Colorado Company }\\ \text { Comparative Balance Sheet}\\\text { December 31,2019 and 2018}\\\begin{array}{|l|r|r|r|}\hline&2018&2017&\text { Increase/(Decrease) }\\\hline \text { Accounts Payable } & \$ 4,000 & \$ 6,000 & \$(2,000) \\\hline \text { Accrued Liabilities } & 2,000 & 1,000 & 1,000 \\\hline \text { Long-term Notes Payable } & \underline{84,000} & \underline{90,000} & \underline{(6,000) } \\\hline \text { Total Liabilities } & \$ 90,000 & \$ 97,000 & \$(7,000) \\\hline \end{array}\end{array}$ How will the change in Accrued Liabilities be shown on the statement of cash flows?

• A) as an addition to Net Income
• B) as a deduction from Net Income
• C) as a deduction from operating cash flows
• D) as an addition to investing cash flows

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