If a company uses the indirect method to prepare the statement of cash flows, how will the adjustment to reflect the amount of cash paid for interest be presented on the statement of cash flows?
A)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.
B)The adjustment will be for to reflect 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.
C)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.
D)The adjustment will be for the increase or decrease in interest 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 paid for interest will be for the increase or decrease in interest payable during the period and will adjust net income in the operating activities section in the statement of cash flows. This adjustment reconciles the non-cash expenses (such as depreciation and amortization) included in net income to the actual cash flows from operations.

If a Company Uses the Indirect Method to Prepare the Statement