Question

Bruce Company reported net income for 2018 of $100,000. The company reported depreciation expense of $17,500 and amortization of $5,000. The company also reported a loss on the sale of equipment of $2,500. Based only on this information, the company would report cash flow from operating activities of:

Answer 1

Net Cash inflow from operating activities = $125,000

Step-by-step explanation:

Cash flow from operating activities means only those transactions involving cash which are related to daily business of the company.

Net income = $100,000

Add: Depreciation = $17,500

Add: Amortization = $5,000

Add: Loss on sale of equipment = $2,500

Net Cash inflow from operating activities = $125,000

Note:

1. Depreciation and amortization are non cash expenses thus, added back.

2. Loss on sale of equipment is added as does not relate to operating activity. The entire amount received from sale of equipment is added to investing activity.

Final Answer

Net Cash inflow from operating activities = $125,000