Presented below is the operating activities section of the statement of cash flows for Golden Consulting for 2016: $\begin{array}{lr}
\text { Operating activities: }\
\text { Net income } & \$ 92,000 \
\text { Add: Depreciation } & 20,000 \
\text { Decrease in accounts receivable } & 8,000 \
& \$ 120,000 \
\text { Deduct: Decrease in accounts payable } & \$(6,000) \
\text { Net cash inflow from operating activities } & \$ 114,000
\end{array}$ Which method of preparing the operating activities section has Golden Consulting used?
A) The direct method.
B) The indirect method.
C) Either method.
D) Cannot be determined without further information.

Question

Quizplus · Accepted Answer

Golden Consulting has used the indirect method for preparing the operating activities section of the statement of cash flows, as indicated by the adjustment of net income for non-cash items (depreciation) and changes in working capital accounts (accounts receivable and accounts payable).

Presented Below Is the Operating Activities Section of the Statement