Question

The comparative balance sheets of Friends, Inc. show a net increase in accounts receivable of $650 and a net decrease in inventory of $500. To determine net cash flow from operating activities under the indirect method, net income should be:

Answer 1

Answer:

Net income would be decreased by $150

Explanation:

Given that

Net increase in account receivable = $650

Net decrease in inventory = $500

So by considering the above information, the net income would be decreased by

= Net decrease in inventory - Net increase in account receivable

= $500 - $650

= -$150

And, the same is to be reported on the operating activities under the indirect method of the cash flow statement