Question

S Company reported net income for 2021 in the amount of $450,000. The company's financial statements also included the following: Increase in accounts receivable $ 79,000 Decrease in inventory 69,000 Increase in accounts payable 220,000 Depreciation expense 101,000 Gain on sale of land 141,000 What is net cash provided by operating activities under the indirect method?

Answer 1

$620,000

Step-by-step explanation:

Net income - 450,000

Increase in accounts receivable (79000)

Decrease in inventory 69000

Increase in accounts payable 220000

Depreciation expenses 101000

Gain on sale of land (141000)

Net cash 620000

In cash flow calculations , non cash expenses are added back and non cash income deducted as they were not of any cash effect as at reporting time . (depreciation and gain on sale of land)

Increase in receivable means an outflow of cash as customers are holding unto cash

Decrease in inventory means cash inflow as inventory are disposed through sales

Increase in payable mean inflow through delayed payment