The following items were reported on the balance sheets and income statement for Bezos Corp.: $\begin{array}{lr}
\text { Accounts payable, December } 31,2016 & \$ 4,000 \
\text { Accounts payable, December } 31,2017 & 48,000 \
\text { Operating expenses } & 286,000
\end{array}$ How would the change in accounts payable be reported in the operating activities section of the statement of cash flows under the indirect method?
A) As an addition to operating expenses
B) As a deduction from operating expenses
C) As an addition to net income
D) As a deduction from net income

Question

Quizplus · Accepted Answer

The increase in accounts payable from $4,000 to $48,000 indicates that not all operating expenses were paid in cash. Under the indirect method, increases in accounts payable are added to net income in the operating activities section of the statement of cash flows, as they represent expenses incurred but not yet paid, thus not reducing the cash during the period.

The Following Items Were Reported on the Balance Sheets and Income