Question

5 Nelson Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Nelson Corp. Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Increase/decrease ($1,000) $1,500 Long-Term Notes Payable $56,000 $60,000($4,000) ($3,500) Accounts Payable Accrued Liabilities $8,000 $9,000 $3,000 $1,500 $67,000 $70 50 Total Liabilities The change in Accrued Liabilities will be shown as a negative cash flow in the adjustments to Net Income. True False

Answer 1

Correct answer----False

Accrued liabilities are increasing which means there is a positive cash or in the adjustment to cash flow when preparing cash flow statement using indirect method.

Accrued liability is a current liability and when current liabilities decrease it is treated as negative cash flow but when current liabilities increase then positive cash flow occurs which is the case above.