Question

Net cash flow from operating activities for 2018 for Graham Corporation was $495,000. The following items are reported on the financial statements for 2018:
Depreciation and amortization $ 30,000
Cash dividends paid on common stock 18,000
Increase in accounts receivable 36,000

Based only on the information above, Graham’s net income for 2018 was:




$501,000.
$429,000.
$441,000.
$489,000.

Answer 1

Answer:

$501,000

Explanation:

The statement of cash flows has 3 major sections for the activities of a business. These are operating, investing and financing.

The operating section is where the net profit, non-cash items and movements within the current assets and liabilities are dealt with.

The non-cash items considered in the income statement when computing the net income are added or subtracted back (considering the initial treatment in the income statement). An increase in assets other than cash in cash flow statement is an outflow while dividend paid is a financing activity.

net income + $30,000 - $36,000 = $495,000

Net income = $495,000 - $30,000 + $36,000

= $501,000