Question

The following information has been provided to you by Watts Corporation: Net income $ 175,300 Increase in accounts payable 18,500 Increase in inventory 17,500 Increase in accounts receivable 9,700 Increase in bonds payable 75,000 Amortization of bond premium 5,400 Depreciation expense 21,300 Decrease in income taxes payable 7,300 What is Watts Corporation’s net cash flow from operating activities?

Answer 1

$186,000

Step-by-step explanation:

Cash Flow from operating activities cash generated from to day to day activities of the business. All the cash flows needed to operate the business smoothly.

Cash flows from operating activities

Net Income $175,300

Add: Non cash Expense Adjustments:

Depreciation expense $21,300

Amortization of bond premium $5,400

$26,700

Change in Working Capital:

Increase in inventory ($17,500)

Increase in accounts receivable ($9,700)

Increase in accounts payable $18,500

Decrease in income taxes payable ($7,300)

($16,000)

Net Operating Cash flow $186,000

Cash Flow from operating activities cash generated from to day to day activities of the business. All the cash flows needed to operate the business smoothly.

Depreciation and amortization are non cash expenses which was deducted in the calculation of Net income.

Increase in Liability will provide the cash and increase in assets will use the cash.

Increase in Bond Payable is the change in long term liability which is not included in the working capital and it is the part of the cash flow from financing activities.