A decrease in deferred taxes (liability) would appear on the statement of cash flows, prepared using the indirect method as a(n)
A) addition to net income in the operating activities category.
B) deduction to net income in the operating activities category.
C) inflow of cash in the financing activities category.
D) outflow of cash in the financing activities category.

Question

Quizplus · Accepted Answer

A decrease in deferred taxes (liability) would result in a deduction to net income in the operating activities category on the statement of cash flows using the indirect method. This is because the decrease in the liability means that less taxes will be paid in future periods, resulting in an increase in cash flow from operating activities.

A Decrease in Deferred Taxes (Liability) Would Appear on the Statement