Question

Based on this income statement for Company ZYX for the year ending December 31, 2014, what adjustment would need to be made to Net Income to account for Gain or Loss in calculating cash flow from Operating Activities using the indirect method?"
COMPANY ZYX
INCOME STATEMENT
For the Year Ending 12/31/14
Net Sales $ 500,000
Cost of Sales $ 200,000
GROSS PROFIT 300,000
Operating Expenses
Research and Development 35,000
Marketing and Sales Expenses 60,000
General and Administrative Expense 21,000
TOTAL OPERATING EXPENSES 116,000
OPERATING INCOME 184,000
Gain(Loss) on sale of Equipment (30,000)
Gain (Loss) on sale of debt investment 46,000
Other Income/(Expense) (10,000)
Net INCOME BEFORE TAXES 190,000
Income Tax Expense 57,000
NET INCOME $133,000

Answer 1

Answer:

Company ZYX cash flow from Operating Activities using the indirect method are given below.

Cash flow from operating activities

Net INCOME BEFORE TAXES                        $ 190,000

Adjustment For

Gain(Loss) on sale of Equipment                   $  30,000

Other Income/(Expense)                                 ($  46,000)

Working capital changes                                     0

Net cash from operating activities                 $ 174,000