Avatar Company Uses the Indirect Method to Prepare the Cash

question 6

True/False

Avatar Company uses the indirect method to prepare the cash flow statement.Please refer to the following section of the comparative balance sheet:
$$\begin{array} { | l | r | r | r | } \hline & { \mathbf { 2 0 1 7 } } & { \mathbf { 2 0 1 6 } } & { \text { Increase/decrease } } \\\hline \text { Accounts payable } & \$ 4000 & \$ 6000 & \$ ( 2000 ) \\\hline \text { Accrued liabilities } & 2000 & 1000 & 1000 \\\hline \text { Long-term bills payable } & 84000 & 90000 & ( 6000 ) \\\hline \text { Total liabilities } & \$ 90000 & \$ 97000 & \$ ( 7000 ) \\\hline\end{array}$$
The change in accounts payable will be shown as a positive cash flow in the adjustments to Profit.

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Definitions:

Production

The process of creating goods and services, involving tasks such as design, raw materials sourcing, and manufacturing.

Standardization

The process of establishing common standards within an industry to ensure that products and services are consistent and compatible.

Contract Manufacturer

A company hired to produce goods on behalf of another company, under the hiring company's brand name.