Weygandt, Financial & Managerial Accounting, 2e Help I System Announcements (1 U

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Weygandt, Financial & Managerial Accounting, 2e Help I System Announcements (1 Unread) PRINTER VERSION Multiple Choice Question 147 In converting net income to net cash provided by operating activities, under the indirect method: decreases in accounts receivable and increases in prepaid expenses are added. decreases in accounts payable and decreases in inventory are deducted increases in accounts receivable and increases in accrued liabilities are deducted. decreases in inventory and increases in accrued liabilities are added. SAVE FOR LATER Question Attempts: 0 of 1 used

Explanation / Answer

D. Decreases in inventory and increases in accrued liabilities are added.

Reason : as per operating activity section on cash flow statement by indirect method , changes in current assets and current liabilities are recorded, that is increase in current liability and decrease in current assets are added while increase in current assets and decrease in current liabilities are deducted to net income for calculating operating cash flow activity.

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