Question

The following information is taken from the income statement of Olympic, Inc.: Depreciation Expense $ 90,000 Amortization Expense 15,000 Loss on Sale of Equipment 9,000 Gain on Sale of Building 27,000 Net Income 315,000 Based on this information, what is the amount of net cash flow provided by operating activities?A. $420000 B. $447000 C. $438000 D. $402000

Answer 1

Answer:

The correct option is D,$402,000.

Explanation:

In determining the cash flow provided by operating activities,we need to adjust the net income for effects of non cash items reported.It is important  to note that the reverse of the earlier treatment of the items is what is required now.For instance depreciation and amortization  were deducted in  income statement,for cash flow purposes we need to add both to net income.

Net income                          $315,000

add depreciation                $90,000

amortization                         $15,000

loss on sale of equipment  $9,000

less gain on sale of building($27000)

Cash flow from operations  $402,000

The cash flow from operating activities as adjusted is $402,000.