Question

In its statement of cash flows issued for the year ending September 30, Berne Company reported a net cash inflow from operating activities of $123,000. The following adjustments were included in the supplementary schedule reconciling cash flow from operating activities with net income:
Depreciation $38,000
Increase in net accounts receivable 31,000
Decrease in inventory 27,000
Increase in accounts payable 48,000
Increase in interest payable 12,000
Net income is
A. $41,000
B. $29,000
C. $79,000
D. $217,000

Answer 1

Answer:

B. $29,000

Explanation:

The cashflow from operating activities is calculated as below:

Cashflow from operating activities = Net income + Depreciation - Working capital investment

                                                          = Net income + Depreciation - (Change in inventories + Change in account receivables - Change in account payables)

Putting all the number together, we have:

123,000 = Net income + 38,000 - [(-27,000) + 31,000 - 48,000 - 12,000),

Solve the equation we get Net income = 29,000.