Krech Corporation's comparative balance sheet appears below:
| Comparative Balance Sheet |
| Ending Balance | Beginning Balance |
|---|
| Assets: | | |
|---|
| Current assets: | | |
|---|
| Cash and cash equivalents | $ 31,000 | $ 28,000 |
|---|
| Accounts receivable | 18,000 | 20,000 |
|---|
| Inventory | 58,000 | 56,000 |
|---|
| Prepaid expenses | 12,000 | 10,000 |
|---|
| Total current assets | 119,000 | 114,000 |
|---|
| Property, plant, and equipment | 374,000 | 354,000 |
|---|
| Less accumulated depreciation | 190,000 | 165,000 |
|---|
| Net property, plant, and equipment | 184,000 | 189,000 |
|---|
| Total assets | $ 303,000 | $ 303,000 |
|---|
| Liabilities and stockholders' equity: | | |
|---|
| Current liabilities: | | |
|---|
| Accounts payable | $ 13,000 | $ 9,000 |
|---|
| Accrued liabilities | 52,000 | 53,000 |
|---|
| Income taxes payable | 67,000 | 69,000 |
|---|
| Total current liabilities | 132,000 | 131,000 |
|---|
| Bonds payable | 76,000 | 73,000 |
|---|
| Total liabilities | 208,000 | 204,000 |
|---|
| Stockholders’ equity: | | |
|---|
| Common stock | 28,000 | 26,000 |
|---|
| Retained earnings | 67,000 | 73,000 |
|---|
| Total stockholders’ equity | 95,000 | 99,000 |
|---|
| Total liabilities and stockholders' equity | $ 303,000 | $ 303,000 |
|---|
The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It did not sell or retire any property, plant, and equipment during the year. The company uses the indirect method to determine the net cash provided by operating activities.
Which of the following is correct regarding the operating activities section of the statement of cash flows?
▸ The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be subtracted from net income
▸ The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be added to net income
▸ The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be subtracted from net income
▸ The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be added to net income
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