Question

Langley Company reported net income for 2022 in the amount of $460,000. The company's financial statements also included the following: Increase in accounts receivable$77,000 Decrease in inventory 62,000 Increase in accounts payable 250,000 Depreciation expense 107,000 Gain on sale of land 147,000 What is net cash provided by operating activities under the indirect method

Answer 1

Answer:

$655,000

Explanation:

Cash flow from operating activities involved all the cash flows related to the operations of the company like sales , purchases, receivable, payable etc.

Net Cash flow is the net of receipts and Payment.

Following are the operating cash flows.

Cash flows from operating activities

Net Income                                                  $460,000

Add: Non cash Expense Adjustments:

Depreciation                                                  $107,000

Change in Working Capital:

Increase in Account receivable ($77,000)

Decrease in Inventory                 $62,000

Increase in Account payable      $250,000

Less: Net Change in WC                               $235,000

Other Adjustments

Gain on sale of Land                                    ($147,000)

Net Operating Cash flow                              $655,000

Depreciation is a non cash expense deducted from the revenue to calculate net income. Now it needs to be added back.

Answer 2

Answer:

The net cash provided by operating activities under the indirect method is $655,000.

Explanation:

Langley Company

Statement of cash flows (extract)

Net income                                                    $460,000

Add: Depreciation expense                            107,000

Less: Gain on sale of land                             (147,000)

Increase in accounts receivable                    (77,000)

Decrease in inventory                                      62,000

Increase in accounts payable                        250,000

Net cash provided by operating activities  $655,000