Question

Covington corporation's comparative balance sheet for current assets and liabilities was as follows:

Answer 1

Adjusting the net income of $577,700 for changes in operating assets and liabilities for Covington Corporation shows a net cash flow from operating activities of $578,600.

What is the net cash flow from operating activities?

The net cash flow from operating activities indicates the additional cash generated from operations.

This includes the net income, adjustments for noncash items, like depreciation, and changes in working capital.

The operating activities refer to the daily core business activities of an entity.  Operating activities are distinguishable from financing and investing activities.

Data and Calculations:

Covington Corporation

Comparative Balance Sheet

                                Dec. 31, 2012   Dec. 31, 2011    Changes

Accounts receivable  $19,300            $18,100        + $1,200

Inventory                      58,100             58,800           - $700

Accounts payable       19,400              19,000          + $400

Dividends payable     18,000               17,000       + $1,000

Sources of Cash:

Inventory 700

Accounts payable 400

Dividends payable 1,000

Uses of Cash:

Accounts receivable 1,200

Operating Activities:

Net Income          $577,700

Accounts receivable (1,200)

Inventory                       700

Accounts payable        400

Dividends payable    1,000

Cash from operating

 activities         $578,600

Thus, Covington Corporation's net cash from operating activities increased by $578,600.

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Question Completion:

Covington Corporation's comparative balance sheet for current assets and liabilities was as follows:

                                Dec. 31, 2012   Dec. 31, 2011

Accounts receivable  $19,300            $18,100

Inventory                      58,100             58,800

Accounts payable       19,400              19,000

Dividends payable     18,000               17,000

Adjust net income of $577,700 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.