Question

Zinc Company's net income last year was $60,000, and cash dividends declared and paid to the stockholders were $20,000. Changes in selected balance sheet accounts for the year appear below:

Increases
(Decreases)
Debit balances:
Accounts receivable $ (5,000)
Inventory (4,000)
Prepaid expenses 8,000
Credit balances:
Accumulated depreciation 15,000
Accounts payable (6,000)
Accrued liabilities 14,000
Taxes payable 8,000
Bonds payable 50,000
Based solely on this information, net cash flow from operating activities under the indirect method on the statement of cash flows would be:
a. $54,000.
b. $21,000.
c. $92,000.
d. $87,000.

Answer 1

c. $92,000

Step-by-step explanation:

The computation of net cash flow from operating activities under the indirect method is shown below:-

Statement of Cash Flows(Partial)

Cash Flows from Operating Activities:

Net Income $60,000

Adjustments to reconcile net income

to net cash provided by operating activities:

Depreciation Expense $15,000

Decrease in Accounts Receivable $5,000

Decrease in Accounts Payable ($6,000)

Increase in Accrued Liabilities $14,000

Increase in taxes payable $8,000

Increase in Prepaid Expenses ($8,000)

Decrease in Inventory $4,000 $32,000

Net Cash provided by

Operating Activities $92,000