When preparing a statement of cash flows using the indirect method,each of the following should be classified as an operating cash flow except:
A)An increase in accounts receivable.
B)A decrease in accounts payable.
C)Proceeds from the disposal of a long-term asset with no gain or loss.
D)An increase in prepaid expenses.
E)A decrease in accrued expenses payable.

Question

Quizplus · Accepted Answer

An increase in accounts receivable (A), an increase in prepaid expenses (D), and a decrease in accrued expenses payable (E) all affect operating cash flows as they are adjustments to net income to arrive at cash flows from operating activities. A decrease in accounts payable (B) also affects operating cash flows as it represents a reduction in the amount owed to suppliers, which would have been included in expenses. However, proceeds from the disposal of a long-term asset with no gain or loss (C) would be classified as a cash flow from investing activities, as it represents a sale of a capital asset.

When Preparing a Statement of Cash Flows Using the Indirect