The following items were reported on the balance sheets and income statement for the Flying Mullet Company: $\begin{array}{lr}
\text { Accounts receivable, December } 31,2016 & \$ 85,000 \
\text { Accounts receivable, December } 31,2017 & 98,000 \
\text { Sales-2017 } & 750,000
\end{array}$ How would the change in accounts receivable be reported in the operating activities section of the statement of cash flows under the indirect method?
A) As an addition to sales
B) As a deduction from sales
C) As an addition to net income
D) As a deduction from net income

Question

Quizplus · Accepted Answer

The increase in accounts receivable from $85,000 to $98,000 indicates that not all sales were collected in cash. Under the indirect method, this increase in accounts receivable would be deducted from net income in the operating activities section of the statement of cash flows to adjust for revenues that did not result in an increase in cash.

The Following Items Were Reported on the Balance Sheets and Income