Question

Miguel, Inc. reported net income of $2.5 million in 2022. Depreciation for the year was $160,000, accounts receivable decreased $350,000, and accounts payable decreased $280,000. Compute net cash provided by operating activities using the indirect approach.

Answer 1

Answer:

$2,730,000

Explanation:

The opening cash balance is netted off the cash flows from all activities namely; Operating, investing and financing activities to get the closing cash balance.

The operating activities includes elements such as net income, depreciation and amortization, changes in working capital etc.

Given;

Net income = $2,500,000

Depreciation = $160,000

accounts receivable decrease = $350,000 (inflow of cash)

accounts payable decrease =  $280,000 (outflow of cash)

net cash provided by operating activities using the indirect approach

= $2,500,000 + $160,000 + $350,000 - $280,000

= $2,730,000