Answer:
Explanation:
The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:
Cash flow from Operating activities - Indirect method
Net income $555,000
Adjustment made:
Add : Depreciation expense $510,000
Add: Loss on the sale of land $5,000
Add: Decrease in accounts receivable $25,000
Add: Decrease in inventory $515,000
Add: Increase in accounts payable $545,000
Total of Adjustments $1,600,000
Net Cash flow from Operating activities $2,155,000
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
where,
EBIT = Sales - cost of good sold - depreciation expense
These things are considered for computing the operating cash flows
