Which of the following would be added to net income when using the indirect approach to prepare the cash from operating activities of the Statement of Cash Flows?
A) increase in inventory
B) gain on sale of investments
C) increase in dividends payable
D) decrease in accounts receivable

Question

Quizplus · Accepted Answer

Using the indirect approach, net income is adjusted for changes in current assets and liabilities. An increase in inventory, a gain on sale of investments, and an increase in dividends payable are all items that would be subtracted from net income. On the other hand, a decrease in accounts receivable indicates that cash has been collected from customers, and this would be added to net income to arrive at cash from operating activities.

Which of the Following Would Be Added to Net Income