Question

Virginia Company uses the indirect method to prepare the statement of cash flows. Refer to the following

section of the comparative balance sheet:
Virginia Company
Comparative Balance Sheet
December 31, 2018 and 2017
2018 2017 Increase/(Decrease)
Accounts Payable $4,000 $6,000 $(2,000)
Accrued Liabilities 2,000 1,000 1,000
Long-term Notes Payable 84,000 90,000 (6,000)
Total Liabilities $90,000 $97,000 $(7,000)
How will the change in Accounts Payable be shown on the statement of cash flows?
A) as a deduction from investing cash flows
B) as an addition to operating cash flows
C) as an addition to Net Income
D) as a deduction from Net Income

Answer 1

D) as a deduction from Net Income

Step-by-step explanation:

When the company decrease the value of the accounts payable it means that the company pays its debts in less time than previous year.

In effect the company sees its net income decrease because needs the money to compensate the lower value on the Accounts Payable as a consequence of beeing paid in less time.