Question

Blue Company's net income last year was $35,000. Changes in selected balance sheet accounts for the year appear below: Increases (Decreases) Debit balances: Accounts receivable $(7,000) Inventory 8,000 Prepaid expenses (6,000) Credit balances: Accumulated depreciation 10,000 Accounts payable 13,000 Accrued liabilities (5,000) Taxes payable 5,000 Based solely on this information, net cash flow from operating activities under the indirect method on the statement of cash flows would be:

Answer 1

$63,000

Step-by-step explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $35,000

Adjustment made:

Add : Depreciation expense $10,000

Add: Decrease in accounts receivable $7,000

Less: Increase in inventory -$8,000

Add: Increase in accounts payable $13,000

Less: Decrease in accrued liabilities - $5,000

Add: Decrease in prepaid expenses $6,000

Add: Increase in income tax payable $5,000

Total of Adjustments $28,000

Net Cash flow from Operating activities $63,000