Question

Salud Company reports the following information. Use the indirect method to prepare only the operating activities section of its statement of cash flows for the year ended December 31, 2017. (Amounts to be deducted should be indicated with a minus sign.) Selected 2017 Income Statement Data Selected Year-End 2017 Balance Sheet Data Net income $ 400,000 Accounts receivable increase $ 40,000 Depreciation expense 80,000 Prepaid expenses decrease 12,000 Gain on sale of machinery 20,000 Accounts payable increase 6,000 Wages payable decrease 2,000

Answer 1

Answer:

The Net cash is 436.000

Explanation:

To get net cash flow using the indirect method we must make adjustments to the net income.  

It depends on the account if it is added or subtracted  to net income

In this case,  

Net income 400.000

Adjustment to reconcile the net income to cash  

- Accounts receivable increase   (40.000)

+ Depreciation expense 80.000

+ Prepaid expenses decrease  12.000

- Gain on sale of machinery (20.000)

+ Accounts payable increase 6.000

- Wages payable decrease (2.000)

 Net cash                       436.000