When using the indirect method to prepare the statement of cash flows, an increase in noncash current assets is
A)subtracted from current liabilities in the cash flows from financing activities section.
B)subtracted from net income in the cash flows from operating activities section.
C)added to net income in the cash flows from operating activities section.
D)added to equipment purchases in the cash flows from investing activities section.

Question

Quizplus · Accepted Answer

Because an increase in noncash current assets is caused by a decrease in cash, it is subtracted from net income to arrive at cash flows from operating activities.

When Using the Indirect Method to Prepare the Statement of Cash