Question

Indirect: Computing cash flows from operation

Case X Case Y Case Z
Net income $7,200 $180,000 $129,600
Depreciation expense 54,000 14,400 43,200
Accounts receivable increase (decrease) 72,000 36,000 (7,200)
Inventory increase (decrease) (36,000) (18,000) 18,000
Accounts payable increase (decrease) 43,200 (39,600 ) 25,200
Accrued liabilities increase (decrease) (79,200 ) 21,600 (14,400)
For each of the above separate cases X, Y, and Z, compute cash flows from operations using the indirect method.

Answer 1

CASE X CASE Y CASE Z

NET INCOME $7,200 $180,000 $129,600

ADJUSTMENT TO RECONCILE

NET INCOME TO NET CASH

DEPRECIATION $54,000 $14,400 $43,200

CHANGES IN ASSET & LIABILITIES

ACCOUNT RECEIVABLES $72,000 $36,000 ($7,200)

INVENTORY ($36,000) ($18,000) $18,000

ACCOUNT PAYABLE $43,200 ($39,600) $25,200

ACCRUED LIABILITY ($79,200) $21,600 ($14,400)

NET CASH PROVIDED BY $61,200 $194,400 $194,400

OPERATING ACTIVITY