Question

Adophus, Inc.'s 2010 income statement reported total revenues of $850,000 and total expenses (including $40,000 depreciation) of $720,000. The 2010 balance sheet reported the following: accounts receivable beginning balance of $50,000 and ending balance of $40,000; accounts payable beginning balance of $22,000 and ending balance of $28,000. Therefore, based only on this information and using the indirect method, the 2010 net cash inflow from operating activities was:

Answer 1

The net cash inflow from operating activities for 2010, based on the information given, is $86,000.

Step-by-step explanation:

The net cash inflow from operating activities can be calculated using the indirect method of the statement of cash flows. In this method, the starting point is the net income from the income statement. To calculate the net cash inflow, we need to adjust the net income for non-cash expenses, changes in working capital, and other non-operating activities.

Based on the information given, the net income for 2010 is $850,000 - $720,000 = $130,000. From this net income, we need to make adjustments for non-cash expenses, such as depreciation. In this case, depreciation expense is given as $40,000, so we subtract that from the net income to get $130,000 - $40,000 = $90,000.

Next, we need to consider changes in working capital. The increase in accounts receivable is $50,000 - $40,000 = $10,000, and the increase in accounts payable is $28,000 - $22,000 = $6,000. To calculate the net cash inflow from operating activities, we need to subtract the increase in accounts receivable and add the increase in accounts payable to the adjusted net income. Therefore, the net cash inflow from operating activities is $90,000 - $10,000 + $6,000 = $86,000.

Answer 2

Adolphus, Inc.

Therefore, based only on this information and using the indirect method, the 2010 net cash inflow from operating activities was:

= $186,000.

Step-by-step explanation:

a) Data and Calculations:

Total revenues = $850,000

Total expenses 720,000

Operating income $130,000

Depreciation = 40,000

Beginning Ending Changes

Accounts receivable $50,000 $40,000 -$10,000

Accounts payable $22,000 $28,000 +$6,000

Operating activities section of the Statement of Cash Flows, 2010:

Net income $130,000

Non-cash expenses:

Depreciation 40,000

Changes in working capital:

Accounts receivable 10,000

Accounts payable 6,000

Net cash inflow = $186,000