Using Exhibit 5, assume that the amount of Net Income on the Income Statement for the year was $71,800. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of net income on the Cash flow from operating activities section?

EXHIBIT 5

Increase

(Decrease)

Net Income (loss) $XXX

Adjustments to reconcile net income to net cash flow

from operating activities:

Depreciation of fixed assets XXX

Losses on disposal of assets XXX

Gains on disposal of assets (XXX)

Changes in current operating assets and liabilities:

Increases in *noncash current operating assets (XXX)

Decreases in **noncash current operating assets XXX

Increases in **current operating liabilities XXX

Decreases in *current operating liabilities (XXX)

*SUBTRACT **ADD

Increases in accounts receivable Decreases in accounts receivable

Increases in inventory Decreases in inventory

Increases in prepaid expenses Decreases in prepaid expenses

Decreases in accounts payable Increases in accounts payable

Decreases in accrued expenses payable Increases in accrued expenses payable

		Start the Cash Flow from Operating Activities section with the $71,800
		Include the $71,800 in with the Adjustment to reconcile net income to net cash flows from operating activities section as an addition
		Include the $71,800 in the Changes in current operating assets and liabilities as an addition
		Ignore the $71,800 and do not use it in the Cash Flow from Operating Activities section