A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as:
A)An increase in cash flows from operating activities
B)An increase in cash flows from investing activities
C)A decrease in cash flows from operating activities
D)A decrease in cash flows from investing activities
E)An increase in cash flows from financing activities

Question

Quizplus · Accepted Answer

When using the indirect method for the statement of cash flows, a decrease in inventory is added back to net income in the operating activities section because it means less cash was used than reported in net income, indicating an increase in cash flow from operating activities.

A Decrease in the Inventory Account During the Year Should