Final answer:
Based on the indirect method of calculating cash flows, the cash flows from operating activities for Tripp Company are $28,000, investing activities are $6,000, and financing activities are -$2,000. The available answer choices do not match the calculated results.
Step-by-step explanation:
To calculate the cash flows from operating, investing, and financing activities, we use the indirect method with the information provided about Tripp Company. Here's how:
- Cash flow from operating activities: Start with net income, then adjust for non-cash transactions and changes in working capital.
- Net income: $20,000
- Add back Depreciation expense (non-cash): $3,000
- Decrease in Inventory (increased cash): $3,000
- Increase in Accounts Payable (increased cash): $4,000
- Decrease due to Increase in Accounts Receivable (decreased cash): -$2,000
- Total Cash Flow from Operating Activities: $20,000 + $3,000 + $3,000 + $4,000 - $2,000 = $28,000
Cash flow from investing activities: This includes the cash spent on or received from the sale of long-term assets.
- Proceeds from the sale of equipment: $6,000
- Total Cash Flow from Investing Activities: $6,000
Cash flow from financing activities: This section includes cash flows related to equity and debt financing transactions.
- Payment of Dividends: -$2,000
- Total Cash Flow from Financing Activities: -$2,000
Therefore, the correct answers are:
1. The cash flow from operating activities is $28,000.
2. The cash flow from investing activities is $6,000.
3. The cash flow from financing activities is -$2,000.
It appears that none of the provided options (A, B, C, D) match our calculated results. The calculations should be double-checked against the options given; however, based on the information provided and standard accounting practices, the calculated results do not correspond with the answer choices listed.