27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

If salaries payable was $100,000 at the beginning of the year and $75,000 at the end of the year, should the $25,000 decrease be added to or deducted from income to determine the amount of cash flows from operating activities by the indirect method? Explain.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Cash flows from operating activities: These are the cash produced by the normal business operations.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)
Add: Decrease in current assets
         Increase in current liability
         Depreciation expense and amortization expense
         Loss on sale of plant assets
Deduct: Increase in current assets
              Decrease in current liabilities
              Gain on sale of plant assets
Net cash provided from or used by operating activities

To Determine: The cash flows from operating activities.


In indirect method, the decrease in salaries payable ($25,000) must be deducted from net income to determine cash flows from operating activities...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What does the invisible hand of the marketplace do?

Essentials of Economics (MindTap Course List)

Why is it necessary to journalize and post adjusting entries?

College Accounting (Book Only): A Career Approach

What is an overhead variance? How is it accounted for typically?

Managerial Accounting: The Cornerstone of Business Decision-Making

CORPORATE VALUATION Smith Technologies is expected to generate 150 million in free cash flow next year, and FCF...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Explain how benchmarking can be used to improve activity performance.

Cornerstones of Cost Management (Cornerstones Series)