Question

Suppose your company reports $190 of net income and $46 of cash dividends paid, and its comparative balance sheet indicates the following. Beginning Ending Cash $ 41 $ 241 Accounts Receivable 105 211 Inventory 275 171 Total $ 421 $ 623 Salaries and Wages Payable $ 16 $ 80 Common Stock 130 124 Retained Earnings 275 419 Total $ 421 $ 623 Required: Prepare the operating activities section of the statement of cash flows, using the indirect method.

Answer 1

$252

Step-by-step explanation:

The cash from operating activities is cash flow derived from the main line of the business.As the name indicates,it is cash generated from day to day operations of the business before considering the cash flow impact of the financing and investing activities.

Net income $190

Increase in accounts receivable($211-$105) ($106)

reduction in inventory ($275-$171) $104

increase in salaries and wages payable($80-$16) $64

Cash flow generated/(used) in operating activities $252

Dividends is not captured because it relates to financing activities.

An increase in current liability implies the counterparty were denied cash which is a plus on the cash flow statement while increase in current asset has an opposite effect