Question

TIPOLI HO TOP 2014 T Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet: 2013 Increase/decrease Cash $ 33,000 $ 18,000 $15,000 Accounts receivable 22,000 35,000 (13,000) Inventory 170,000 115,000 55,000 Total assets $225,000 $168,000 $57,000 Classification an items: A) Operating activities minus positive cash flow B) Operating activities minus negative cash flow C) Financing activities minus positive cash flow D) Investing activities minus negative cash flow 1. How will the change in Accounts receivable be shown on the statement of cash flows? 2. How will the change in Inventory be shown on the statement of cash flows? 3. How will the change in Accounts payable be shown on the statement of cash flow? 4 How will the change in Accrued liabilities be shown on the statement of cash flows How do you calculate is the Net cash flow provided by operations? Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following income statement Sales revenue $240,000 Interest revenue 1.000 Gain on sale of plant assets 4,000 Total revenues and is $245,000 Cost of goods sold 110.000 Salary expense Depreciation expense 45,000 12,000 23,000 1,000 Other operating expenses Interest expense income tax expense 5.000 Total expenses $196,000 Net income (los) $49.000 Other formation provided Current assets other than cash increase by $24,000 Current liabilities decrease by $1,000 How much is the Net cash flow provided by operations? A) $20,000 positive B) 575,000 positive C) $32,000 positive D) 552,000 positive

Answer 1

1. Since it is net increase in current assets other than Cash
It will be shown as negative cash flow in operating activities

2.
Increase in Accounts receivable will be shown as negative cash flow from operating activities and vice versa
Increase in Inventory will be shown as negative cash flow from operating activities and vice versa
Increase in Accounts Payable will be shown as positive cash flow from operating activities and vice versa
Increase in Accrued Liabilities will be shown as positive cash flow from operating activities and vice versa

Cash Flow Statement
Indirect Method
Cash flow from Operating Activities
Net Income		$   49,000.00
Adjustments
Depreciation	$    12,000.00
Gain on sale of Equipment	$     -4,000.00
Increase in Current Assets	$   -24,000.00
Decrease in Current Liabilities	$     -1,000.00
Total Adjustments		$ -17,000.00
Cash from operating activities			$      32,000.00

Answer is C) $32000 positive