The most recent comparative balance sheet of Giacomelli Corporation appears below:
| Comparative Balance Sheet |
| Ending Balance | Beginning Balance |
|---|
| Assets: | | |
|---|
| Current assets: | | |
|---|
| Cash and cash equivalents | $ 37,000 | $ 29,000 |
|---|
| Accounts receivable | 20,000 | 24,000 |
|---|
| Inventory | 65,000 | 61,000 |
|---|
| Prepaid expenses | 5,000 | 7,000 |
|---|
| Total current assets | 127,000 | 121,000 |
|---|
| Property, plant, and equipment | 424,000 | 399,000 |
|---|
| Less accumulated depreciation | 231,000 | 200,000 |
|---|
| Net property, plant, and equipment | 193,000 | 199,000 |
|---|
| Total assets | $ 320,000 | $ 320,000 |
|---|
| Liabilities and stockholders' equity: | | |
|---|
| Current liabilities: | | |
|---|
| Accounts payable | $ 19,000 | $ 17,000 |
|---|
| Accrued liabilities | 58,000 | 51,000 |
|---|
| Income taxes payable | 47,000 | 42,000 |
|---|
| Total current liabilities | 124,000 | 110,000 |
|---|
| Bonds payable | 77,000 | 80,000 |
|---|
| Total liabilities | 201,000 | 190,000 |
|---|
| Stockholders’ equity: | | |
|---|
| Common stock | 31,000 | 30,000 |
|---|
| Retained earnings | 88,000 | 100,000 |
|---|
| Total stockholders’ equity | 119,000 | 130,000 |
|---|
| Total liabilities and stockholders' equity | $ 320,000 | $ 320,000 |
|---|
The company uses the indirect method to construct the operating activities section of its statement of cash flows.
Which of the following is correct regarding the operating activities section of the statement of cash flows?
▸
The change in Accounts Receivable will be subtracted from net income; The change in Inventory will be added to net income
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The change in Accounts Receivable will be added to net income; The change in Inventory will be subtracted from net income
▸
The change in Accounts Receivable will be added to net income; The change in Inventory will be added to net income
▸
The change in Accounts Receivable will be subtracted from net income; The change in Inventory will be subtracted from net income
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