When preparing a statement of cash flows on the indirect method,each of the following should be classified as an operating activity cash flow except:
A)An increase in accounts receivable.
B)A decrease in accounts payable.
C)Proceeds from the disposal of a long-term asset with no gain or loss.
D)An increase in prepaid expenses.
E)A decrease in accrued expenses payable.

Question

Quizplus · Accepted Answer

An increase in accounts receivable, an increase in prepaid expenses, and a decrease in accrued expenses payable are all adjustments made to net income to arrive at operating cash flows. A decrease in accounts payable is also an operating activity, as it represents cash paid for expenses incurred during the period. However, proceeds from the disposal of a long-term asset with no gain or loss is a non-operating activity and should be classified as an investing cash flow on the statement of cash flows using the indirect method.

When Preparing a Statement of Cash Flows on the Indirect