Question

collins corporation reported a net income of 35,000 depreciation expenses of 20,000 an increase in accounts payable of 2,000 and an increase in accounts receivable of 3,000 net cash flow from operating activities using the indirect method is

Answer 1

Given Information :

Net Income = 35000

Depreciation Expense = 20000

Increase in accounts payable = 2000

Increase in accounts receivable = 3000

Required :

Net cash flow from operating activities = ?

Solution :

To figure out the cash flow from operating activities , we make few adjustments to net income .

Net Income

+ non cash expenses

+ decrease in current assets

- Increase in current assets

+Increase in current liabilities

- decrease in current liabilities

= Net cash flow from operating activities

Following the format above :

Net Income                                                                     35000

+ depreciation ( non cash exp)                                     20000

+increase in accounts payable (current liability)         2000

- Increase in accounts receivable ( current asset)       (3000)

=Net cash flow from operating activities                        54000

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