Part (a) includes options of : Add , Deduct , No effect

Question 5 The following is a list of income statement accounts that must be converted from the accrual basis to the cash basis in order to calculate cash provided (used) by operating activities using the direct method For each of the below income statement accounts, identify if (a) the change in the current asset or current liability account stated in the second column should be added or deducted from the income statement account in order to convert the accrual-based number to a cash-based number; and (b) the title of the resulting cash receipt or payment on the statement of cash flows. The first one has been done for you as an example Add or Deduct from Income Statement Account Add Income Statement Change in Current Asset/ Related Cash Receipt or Payment Cash receipts from customers Account 1. Sales revenue 2. Dividend revenue 3. Interest revenue 4. Rent revenue 5. Cost of goods sold 6. Cost of goods sold 7. Insurance expense 8. Salaries expense 9. Interest expense Current Liability Account Decrease in accounts receivable Increase in dividends receivable Decrease in interest receivable Decrease in unearned rent Decrease in inventory Decrease in accounts payable Decrease in prepaid insurance Decrease in salaries payable Increase in interest payable Decrease in income tax payable Cash payments for operating expenses Cash receipts from customers Cash payments for income tax Cash receipts from dividends Cash receipts from interest Cash payments to suppliers Cash payments to employees Cash payments for interest 10. Income tax expense