Exhibit 12-4
Manning Company uses the indirect method to prepare the statement of cash flows.The following amounts are shown in its December 31,2013,financial statements.

-Refer to Exhibit 12-4.How will the change in accounts payable be reported in the operating activities
A)The increase of $60,000 will be subtracted from sales revenue.
B)The increase of $60,000 will be added to net income.
C)The increase of $60,000 will be added to sales revenue.
D)The increase of $60,000 will be subtracted from net income.
E)None of the answer choices is correct.

Question

Exhibit 12-4
Manning Company uses the indirect method to prepare the statement of cash flows.The following amounts are shown in its December 31,2013,financial statements.
 
-Refer to Exhibit 12-4.How will the change in accounts payable be reported in the operating activities
A)The increase of $60,000 will be subtracted from sales revenue. 
B)The increase of $60,000 will be added to net income. 
C)The increase of $60,000 will be added to sales revenue. 
D)The increase of $60,000 will be subtracted from net income. 
E)None of the answer choices is correct.

Quizplus · Accepted Answer

In the operating activities section of the cash flow statement, an increase in accounts payable is added to net income because it represents expenses that have been incurred but not yet paid, thus increasing cash flow.

Exhibit 12-4 Manning Company Uses the Indirect Method to Prepare the Statement