Question

In preparing a company's statement of cash flows using the indirect method, the following information is availiable:

Net income Accounts payable decreased by Accounts receivable increased by Inventories increased by Depreciation expense $82,000 33,000 40,000 20,000 60,000 Net cash provided by operating activities was: Multiple Choice ο $115,000. ο $155,000. ο $49,000. ο $75,000. ο $82,000.

Answer 1

Correct answer----------$49,000

Working

Cash Flow from Operating Activities:
Net Income		$       82,000.00
Adjustments to reconcile net income to
net cash flow from operating activities
Depreciation expense	$       60,000.00
Changes in current operating assets and liabilities:
Decrease in accounts payable	$     (33,000.00)
Increase in Accounts receivables	$     (40,000.00)
Increase in Inventory	$     (20,000.00)
		$     (33,000.00)
Net cash from operating activities		$       49,000.00

.

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.