Response to the following questions:
1. A retail business, using the accrual method of accounting, owed merchandise creditors (accounts payable) $290,000 at the beginning of the year and $315,000 at the end of the year. How would the $25,000 increase be used to adjust net income in determining the amount of cash flows from operating activities by the indirect method? Explain.
2. a. What is the effect on cash flows of declaring and issuing a stock dividend?
b. Is the stock dividend reported on the statement of cash flows?