Financial statements - Income statement for 20X4 and Comparative Balance Sheet for diving equipment manufacturer Lincoln Corp for December 31, 20X4 and 20X3

Lincoln Corp. - Income Statement as of December 31st, 20X4
Revenue	$	5,000
Cost of Goods Sold	$	3,200
Gross Profit	$	1,800
Operating expenses	$	1,350
Operating Profit	$	450
Loss on sale of equipment	$	20
Income tax expense	$	180
Profit for 2012	$	250

Lincoln Corp. - Balance Sheet - December 31
	20X4			20X3
Assets:
Cash	$	2,350		$	1,800
Accounts Receivable		450			1,000
Inventory		800			700
Prepaid expenses		40			80
Equipment		2,500			1,500
Accumulated Depreciation		(1,350	)		(1,000	)
Total Assets	$	4,790		$	4,080
Liabilities & Shareholders' Equity
Accounts Payable	$	680		$	350
Operating expenses payable		210			100
Income Taxes Payable		120			0
Dividends Payable		50			100
Long term notes Payable		300			70
Common Shares		2,500			2,500
Retained Earnings		930			960
Total Liabilities & Shareholders' Equity	$	4,790		$	4,790

Additional Information for Lincoln Corp:

1) Operating expenses for 20X4 included depreciation for $500

2) Accounts payable relate exclusively to the purchase of inventory

3) Machine with a historical cost of $200 was sold at a loss of $20

4) A new machine was purchased during the year for $1,200

5) Dividends were declared

6) Long term notes payable were issued

What is the adjustment in Accounts Receivables to reconcile profit when using the indirect method is?

Multiple Choice

• No change

• None of the other alternatives are correct

• Accounts Payables are reported in the financing activities section

• Cash inflow for $550

• Cash outflow for $550