Question

Jeremy, an accountant working for a large manufacturing business, is preparing the business’s cash flow statement using the indirect method. Which amount would Jeremy deduct from the net income amount?

A.
a decrease in salaries payable
B.
an increase in depreciation
C.
a decrease in inventory
D.
a decrease in prepaid rent
E.
an increase in short term loans

Answer 1

Correct Answer is c because it is decreasing

Answer 2

The correct answer is A: a decrease in salaries payable.

Step-by-step explanation:

The two things that are deducted from the net income in the indirect method are: An increase in noncash current assets and Decrease in current liabilities. A is correct because salaries payable are a current liability so when they decrease, that is deducted from the net income.