Problem 1 Part 1: Which of the following statements is NOT correct regarding the indirect method of preparing a statement of cash flows? a. A decrease in taxes payable is subtracted from net income b. An increase in merchandise inventory is subtracted from net income C. Depreciation expense is added to net income d. An increase in accounts receivable is added to net income e. A loss on sale of an asset is added to net income Part 2: Asphalt Company had the following information at year end prior to any adjustments Accounts Receivable Allowance for Doubtful Accounts Sales $242,560 S3,271 (credit balance) S1,645,730 Asphalt Company estimates that 0.8% of sales will be uncollectible. What amount should be in the adjusting journal entry for bad debts? (Round answers to the nearest whole dollar.) a $16,437 b.s13,166 C. $1,940 d-s131,658 e. s9,895