Final answer:
Adjustments need to be made in the Operating Section of the statement of cash flows prepared under the indirect method to account for changes in the Accounts Payable and Accrued Expenses account balances for Green Mountain Coffee Roasters.
Step-by-step explanation:
When preparing the Operating Section of the statement of cash flows under the indirect method for Green Mountain Coffee Roasters, adjustments need to be made for changes in the Accounts Payable and Accrued Expenses account balances.
The increase or decrease in the Accounts Payable balance should be added to net income since it is a liability that represents the amount owed to suppliers for goods or services received but not yet paid for. If the Accounts Payable balance increases, it means that the company purchases more goods or services on credit, which would increase the net income. Conversely, if the balance decreases, it means that the company made payments on its accounts payable, which would decrease the net income.
The increase or decrease in the Accrued Expenses balance should also be added to net income. Accrued expenses are expenses that have been incurred but not yet paid. If the Accrued Expenses balance increases, it means that the company has incurred additional expenses that have not been paid, which would increase the net income. Conversely, if the balance decreases, it means that the company has made payments toward its accrued expenses, which would decrease the net income.