Question

Compute the cash flows from operations using the indirect method, if Star Corporation had $250,000 in net income, $30,000 in depreciation expense, a decrease of $20,000 in accounts receivable and an increase in bonds payable of $50,000. Please explain the work done to get the answer.a) $370,000b) $300,000c) $250,000d) $310,000

Answer 1

Answer:

Cash flow from operations = $300,000

Explanation:

Using the indirect method we must adjust income for the non-cash transaction.

Net income = $250,000

Depreciation = $30,000

Decrease of $20,000 in accounts receivable

Increase in bonds payable of $50,000.

Cash flow from operations = Net income + Depreciation  + Decrease  in accounts receivable  =

Cash flow from operations = $250,000 + $30,000 + $20,000 = $300,000