Question

Use the indirect method to answer questions 7-10. The following information is available for Armstrong Company:

Net income $450
Increase in plant and equip. $170
Depreciation expense 80
Payment of dividends 10
Decrease in accts. receiv. 20
Increase in long-term debt 100
Increase in inventories 15
Decrease in accounts payable
30

What is cash flow from operating activities for Armstrong Company?
a. $505
b. $495
c. $335
d. $55

Answer 1

To determine the cash flow from operating activities for Armstrong Company, use the indirect method. Start with net income and adjust for non-cash expenses and changes in working capital.

Step-by-step explanation:

To determine the cash flow from operating activities for Armstrong Company using the indirect method, we start with the net income and adjust for non-cash expenses and changes in working capital.

Net income: $450

Add back depreciation expense: $80

Decrease in accounts receivable: $20

Decrease in accounts payable: $30

Cash flow from operating activities: $450 + $80 + $20 - $30 = $520

Therefore, the correct answer is a. $520.