Question

The net income for Flint Corporation for 2022 was $370,000. For 2022, depreciation on plant assets was $92,500, and the company incurred a loss on disposal of plant assets of $37,000. Compute net cash provided by operating activities under the indirect method, assuming there were no other changes in the company’s accounts. (Show amounts that decrease cash flow with either a - sign e.g -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Computation of net cash provided by operating activities under the indirect method

Cash flow from Operating Activities

Net Income $370,000

Adjastment for Non-Cash Items:

Depreciation $92,500

Adjastment of Other Items already included:

Loss on Disposal of Plant Assets $37,000

Net Cashflow from Operating Activities $499,500

Step-by-step explanation:

Indirect method makes adjastment to Net Income on the following items:

1.Non-Cash Items already included in the Calculation of Net Income

In this case Depreciation is a non-cash item and is added back to arrive at cash flow amount related to Net Income

2.Other items already included in other sections of cashflow statement

Loss on disposal is added back to Net Income. This relates to Activity in Investments

3. Changes to Working Capital

No further details applied to this section in the question.