Question

The financial statements of Simon Co. include the following items (amounts in thousands): Income Statement For the Year Ended December 31, 2017 Net income $ 470 Depreciation and amortization expense 343 At December 31 Balance Sheets 2017 2016 Accounts receivable $ 146 $ 162 Inventory 199 145 Accounts payable 56 102 Income taxes payable 74 40 Required: a. Calculate the net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017. (E(Enter your answer in thousands. (i.e., 20,000 should be entered as 20))

Answer 1

Solution

Simon Co
Cash Flow Statement (partial)
For year ended 31st December
A. Cash Flows from Operating Activity
Net Income	$            470.00
Adjustments to reconcile net income to net cash from operations
Depreciation and amortization expense	$            343.00
Changes in Current assets and liabilities
Decrease in Accounts receivables	$               16.00
Increase in Inventory	$            (54.00)
Decrease in accounts payable	$            (46.00)
Increase in income tax payable	$               34.00
Net cash flow from Operating activities		$            763.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.