Question

Required: Calculate cash flow from operations using the indirect method and the following data:

Net Income was $57,000
Accounts receivable decreased by $12,000
Inventory increased by $9,000
Proceeds from issuing long term debts was $25,000
Accounts Payable increased $4,500
Equipment Purchases were $95,000
Depreciation and amortization expense was $21,000
Prepaid expenses decreased $5,000

1. $90,500
2. $100,500
3. $20,500
4. None of the above

Answer 1

Correct answer-----------(a) $90,500

Working

A. Cash Flows from Operating Activity
Net Income		$      57,000.00
Adjustments to reconcile net income to net cash from operations
Depreciation and amortization expense	$     21,000.00
Changes in working Capital
Decrease in Accounts receivables	$     12,000.00
Increase in Inventory	$     (9,000.00)
Decrease in prepaid expense	$       5,000.00
Increase in accounts payable	$       4,500.00
		$      33,500.00
Net cash flow from Operating activities		$      90,500.00