Which of the following would be shown as a positive number in the Operating section of the SCF under the indirect method? (check all that apply)

Question

Proceeds from a mortgage

Increase in Income Taxes Payable

Decrease in Inventory

Gain on sale of equipment

Depreciation on a building

1 point
6.
Question 6
A company has Net Inc

Answer 1

In the operating section of the Statement of Cash Flows (SCF) under the indirect method, the following items would be shown as positive numbers:

1. Increase in Income Taxes Payable - This is added back because an increase in a liability indicates that cash has not been spent, hence it is a source of cash.

2. Decrease in Inventory - This is also added back because a decrease in inventory indicates that less cash was used to purchase inventory, representing a source of cash.

3. Depreciation on a building - Depreciation is a non-cash expense that is added back to net income in the operating section since it reduces net income but does not use cash.

The other options would be treated as follows:

• Proceeds from a mortgage would not appear in the operating section; it goes in the financing section and is typically treated as a cash inflow.

• Gain on sale of equipment would be subtracted from net income to adjust because it's a non-operating gain, and while it contributes to net income, it does not involve operating cash flows.

So, the items shown as positive numbers in the operating section would be:

• Increase in Income Taxes Payable
• Decrease in Inventory
• Depreciation on a building