Asked by Nolan Blackwell on Jun 30, 2024
Verified
An increase in accrued liabilities of $1,000 during a year would be shown on the company's statement of cash flows prepared under the indirect method as:
A) an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
B) a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
C) a deduction of $1,000 under investing activities.
D) an addition of $1,000 under financing activities.
Indirect Method
A method used in cash flow statement preparation that adjusts net income for changes in non-cash accounts to calculate operating cash flow.
Net Cash Provided
Net cash provided is a financial metric representing the total amount of money generated by a company's operations after accounting for operational expenses and investments.
Accrued Liabilities
Liabilities that have been incurred, but have not yet been paid or recorded through a standard accounting transaction.
- Understand the impact of adjustments in current assets and liabilities on the liquidity of cash flows.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
A
Explanation :
An increase in accrued liabilities indicates that the company has incurred expenses that have not yet been paid in cash, effectively increasing cash flow. Under the indirect method on the statement of cash flows, this increase is added back to net income to calculate net cash provided by operating activities, as it represents a non-cash expense.
Learning Objectives
- Understand the impact of adjustments in current assets and liabilities on the liquidity of cash flows.