Question

S Company reported net income for 2018 in the amount of $400,000. The company's financial statements also included the following: Increase in accounts receivable $ 80,000 Decrease in inventory 60,000 Increase in accounts payable 200,000 Depreciation expense 104,000 Gain on sale of land 148,000 What is net cash provided by operating activities under the indirect method?

Answer 1

Answer:

Net cash provided by operating activities under the indirect method

Cashflow From Operating Activities

Net Income                                                                                         400,000

Adjastments for Non-Cash Items

Depreciation                                                                                        104,000

Adjastments of Other Items Included in Cashflow Statement

Gain on Sale of Land                                                                         (148,000)

Working Capital Adjastments

Increases in Accounts Receivables                                                  (80,000)

Decreases in Inventory                                                                        60,000

Increases in Accounts Payable                                                         200,000

Net Cashflow From Operating Activities                                          536,000

Explanation:

Indirect Method Adjasts the Profit for the year with three things

1. Non-Cash Items
2. Items included in Cashflow Statement
3. Working Capital

To arrive at Net Cashflow from Operating Activities