Changes in account balances are shown in the following chart. For each item, where appropriate, indicate the adjustment that would be made to net income in the operating cash flow section of a cash flow statement using the indirect method and the reason for the adjustment. Item a is provided as an example.
Account Balance Adjustment and Reason
a. Accounts receivable increased $10,000 Subtract $10,000 from net income
because cash collected from
customers was $10,000 less than
sales for the period.
b. Accounts payable increased $7,500
c. Inventory decreased $50,000
d. Notes payable increased $100,000
e. Equipment decreased $80,000
f. Prepaid insurance decreased $22,000
g. Wages payable decreased $8,000
h. Unearned revenue increased $13,000