Question

Creble Company reported net income for 2021 in the amount of $48,000. The company's financial statements also included the following: Increase in accounts receivable $ 4100​ Decrease in inventory 1800​ Depreciation expense 3900​ Gain on sale of equipment 4500​ In the statement of cash flows what is net cash provided by operating activities under the indirect method?

Answer 1

Answer:

$45,100

Explanation:

Cash flows from operating activities:

Net income                                                            $48,000

Adjustments to reconcile net cash flows

from operating activities:                                      ($2,900)

+ depreciation expense $3,900

- gain on sale of equipment ($4,500)

- increase in accounts receivable ($4,100)

+ decrease in inventory $1,800                                              

Net cash flow from operating activities                $45,100

the gain on sale of equipment (or any other productive asset) is included in the cash flows from investing activities, that is why they must be decreased from operating activities.