Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet:
$\begin{array}{|l|r|r|r|}
\hline&2014 & 2013 & \text { Increase/decrease }\
\hline \text { Cash } & \$ 33,000 & \$ 18,000 & \$ 15,000 \
\hline \text { Accounts receivable } & 22,000 & 35,000 & (13,000) \
\hline \text { Inventory } & 170,000 & 115,000 & 55,000 \
\hline \text { Total assets } & \$ 225,000 & \$ 168,000 & \$ 57,000 \
\hline
\end{array}$
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The change in accounts receivable will be shown as a positive cash flow in the adjustments to Net income.

Question

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet:
 $\begin{array}{|l|r|r|r|}
\hline&2014 & 2013 & \text { Increase/decrease }\
\hline \text { Cash } & \$ 33,000 & \$ 18,000 & \$ 15,000 \
\hline \text { Accounts receivable } & 22,000 & 35,000 & (13,000) \
\hline \text { Inventory } & 170,000 & 115,000 & 55,000 \
\hline \text { Total assets } & \$ 225,000 & \$ 168,000 & \$ 57,000 \
\hline
\end{array}$ 
-
The change in accounts receivable will be shown as a positive cash flow in the adjustments to Net income.

Quizplus · Accepted Answer

A decrease in accounts receivable indicates that the company received cash from customers during the period, which would be added back to Net income in the adjustments section of the statement of cash flows using the indirect method. Therefore, the change in accounts receivable will be shown as a positive cash flow adjustment.

Avatar Company Uses the Indirect Method to Prepare the Statement