If a company uses the indirect method to prepare the statement of cash flows, how would the adjustment to reflect the amount of cash payments to employees be presented on the statement of cash flows?
A)The adjustment will be for the increase or decrease in accounts payable during the period and will adjust net income in the operating activities section in the statement of cash flows.
B)The adjustment will be for the increase or decrease in accounts receivable during the period and will adjust net income in the operating activities section in the statement of cash flows.
C)The adjustment will be for the increase or decrease in inventory during the period and will adjust net income in the operating activities section in the statement of cash flows.
D)The adjustment will be for the increase or decrease in wages payable during the period and will adjust net income in the operating activities section in the statement of cash flows.

Question

Quizplus · Accepted Answer

The adjustment to reflect the amount of cash payments to employees would be for the increase or decrease in wages payable during the period and will adjust net income in the operating activities section in the statement of cash flows. This adjustment would represent the portion of the net income that relates to wages paid in cash during the period, which is not reflected in the net income amount reported in the income statement.

If a Company Uses the Indirect Method to Prepare the Statement