When using the indirect method of preparing a statement of cash flows, how will a $23,500 increase in accounts payable affect net income in the operating activities section of the statement of cash flows and why? a. There will be no effect, as this is a non-cash transaction/entry b. Increases in current liabilities are added to net income, so it will increase net cash by $23,500 C. Increases in current liabilities are deducted from net income, so it will decrease net cash by $23,500 d. There is no effect, as accounts receivable are on the balance sheet, not the income statement
When using the indirect method of preparing a statement of cash flows, how will a $23,500 increase in accounts payable affect net income in the operating activities section of the statement of cash flows and why? a. There will be no effect, as this is a non-cash transaction/entry b. Increases in current liabilities are added to net income, so it will increase net cash by $23,500 C. Increases in current liabilities are deducted from net income, so it will decrease net cash by $23,500 d. There is no effect, as accounts receivable are on the balance sheet, not the income statement
Chapter16: Statement Of Cash Flows
Section: Chapter Questions
Problem 2EB: In which section of the statement of cash flows would each of the following transactions be...
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Question
![When using the indirect method of preparing a statement of cash flows, how
will a $23,500 increase in accounts payable affect net income in the operating
activities section of the statement of cash flows and why?
a.
There will be no effect, as this is a non-cash transaction/entry
b.
Increases in current liabilities are added to net income, so it will increase net
cash by $23,500
C.
Increases in current liabilities are deducted from net income, so it will decrease
net cash by $23,500
d.
There is no effect, as accounts receivable are on the balance sheet, not the
income statement](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F93c4a046-4ad1-4788-a335-cffd21d294cf%2Fa75bc061-37f1-4895-931d-88f9b4480476%2Fil6vn17_processed.jpeg&w=3840&q=75)
Transcribed Image Text:When using the indirect method of preparing a statement of cash flows, how
will a $23,500 increase in accounts payable affect net income in the operating
activities section of the statement of cash flows and why?
a.
There will be no effect, as this is a non-cash transaction/entry
b.
Increases in current liabilities are added to net income, so it will increase net
cash by $23,500
C.
Increases in current liabilities are deducted from net income, so it will decrease
net cash by $23,500
d.
There is no effect, as accounts receivable are on the balance sheet, not the
income statement
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