Hi all, When you get Q like following, do u assume deferred taxes to be liability or assets? Use the following financial data for Moose Printing Corporation to calculate the cash flow from operations (CFO) using the indirect method. Net income $225 Increase in accounts receivable 55 Decrease in inventory 33 Depreciation 65 Decrease in accounts payable 25 Increase in wages payable 15 Decrease in deferred taxes 10 Purchase of new equipment 65 Dividends paid 75 A) Increase in cash of $183. B) Increase in cash of $248. C) Increase in cash of $173. D) Decrease in cash of $108.
ask Schweser to clarify!
Answer is B. You are right, it is a little confusing whether it is a decrease in the asset or a decrease in the liability, but I would say unless otherwise stated it should be considered a deferred tax liability.
Liability