Question

Tucker Enterprises' Accounts Receivable increased by $48,000, and its Accounts Payable increased by $27,000. What is the net effect on cash from operations under the indirect method?

Answer 1

Effect on cash is -21000

Step-by-step explanation:

Indirect method make adjustment to reconcile the net income to cash. It depends on the account if it is added or subtracted to net income.

In this case,

Accounts Receivable increased are subtracted from net income and Accounts Payable increased are added to net income

Accounts Receivable increased -48000

Accounts Payable increased +27000

Effect on cash is -21000