Question

Coronado Company reported net income of $109000 for the year ended December 31, 2017. During the year, inventories decreased by $14800, accounts payable decreased by $19600, depreciation expense was $18300 and a gain on disposal of equipment of $9400 was recorded. Net cash provided by operating activities in 2017 using the indirect method was

Answer 1

122,500

Step-by-step explanation:

The formula for cashflow from operations (CFO) calculated by indirect:

CFO = NI + NCC - WCInV, where:

NI: Net income;

NCC: Non-cash charges, which is depreciation in this exercise;

WCInv: Working capital investments, which is calculated as Changes in inventories + Changes in receivables - Changes in payables.

Putting all the numbers together, we have:

CFO = 109,000 + 18,300 - [(-14,800)-(-19,600)] = 109,000 + 18,300 + 14,800 - 19,600 = 122,500

Note: Gain on disposal of equiment is a part of cash flow from investing activities rather than operating activities.