Final answer:
The net cash flow from operating activities is calculated by starting with net income and adjusting for non-cash transactions and changes in working capital. The correct answer is D. $25,250, after making the necessary subtractions and additions to the net income.
Step-by-step explanation:
The student's question pertains to calculating the net cash flow from operating activities using the indirect method. To find this, you start with the net income and make adjustments for non-cash transactions and changes in working capital. In this scenario, the net income is $18,000. You need to subtract the gain on disposal of the asset because it is a non-cash gain, and you add back depreciation expense because it is a non-cash charge. Additionally, you account for the changes in current assets and liabilities: a decrease in Accounts Receivable implies cash was received, and an increase in Accounts Payable means cash payment was deferred, both of which increase cash flow. Therefore, the calculation is as follows:
Net income: $18,000
Subtract: Gain on disposal of asset: -$1,500
Add: Depreciation expense: +$850
Add: Decrease in Accounts Receivable: +$4,500
Add: Increase in Accounts Payable: +$3,400
Net cash flow from operating activities = $18,000 - $1,500 + $850 + $4,500 + $3,400 = $25,250
The correct answer to the student's question is D. $25,250, which is the net cash flow from operating activities.