The comparative balance sheets of Friends,Inc.show a net increase in accounts receivable of $650 and a net decrease in inventory of $500.To determine net cash flow from operating activities under the indirect method,net income should be:
A)Reduced by $650.
B)Increased by $650.
C)Reduced by $150.
D)Increased by $150.

Question

Quizplus · Accepted Answer

Under the indirect method, an increase in accounts receivable is subtracted from net income, and a decrease in inventory is added to net income. Therefore, net income should be reduced by $650 and increased by $500, resulting in a net reduction of $150.

The Comparative Balance Sheets of Friends,Inc