Question

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: ​
Net income for the year was $ 74,000​
Accounts payable decreased by 29,000​
Accounts receivable increased by 36,000​
Inventories increased by 16,000​
Depreciation expense was 52,000​

Net cash provided by operating activities was:
(A) $71,000.
(B) $45,000.
(C) $135,000.
(D) $103,000.
(E) $74,000.

Answer 1

Answer:

(B) $45,000.

Explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $74,000

Adjustment made:

Add : Depreciation expense $52,000

Less: Increase in accounts receivable -$36,000

Less: Increase in inventory -$16,000

Less: Decrease in accounts payable -$29,000

Total of Adjustments -$29,000

Net Cash flow from Operating activities              $45,000