Question

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements—Interest Income (assume that cash received is equal to amount reported)—indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Add to net income to arrive at net cash flows from operating activities.
Subtract from net income to arrive at net cash flows from operating activities.
Not used to adjust net income to calculate net cash flows from operating activities.

Answer 1

Explanation: Subtract from net income to arrive at net cash flows from operating activities.