Question

The Lincoln Company owns no plant assets and had the following income statement for the year:

Sales revenue $800,000
Cost of goods sold $470,000
Wages expense 120,000
Rent expense 42,000
Insurance expense 15,000 647,000
Net income $153,000
Additional information about the company includes:

End of Year Beginning of Year
Accounts receivable $54,000 $49,000
Inventory 60,000 76,000
Prepaid insurance 8,000 7,000
Accounts payable 24,000 18,000
Wages payable 9,000 11,000
Use the piece ding information to calculate the cash flow from operating activities using the indirect method.

Answer 1

The correct answer is $167,000 .

Step-by-step explanation:

As per the data given in the question,

We can calculate the cash flow according to Operating activities: are as follows:

Net income = $153,000

Adjusting net income to net cash provided by operating activities

Less. A/cs receivable Increase = $5,000

Inventory = ($16,000)

Less. Prepaid Insurance = $1,000

A/cs payable Increase = $6,000

Less. Wages payable = ($2,000)

Net cash supported by operating activities = $167,000

Net cash flow = $153,000 - $5,000 + $16,000 - $1,000 + $6,000 -$2,000

= $167,000