Question

An analyst compiled the following information for U Inc. for the year ended December 31, 2021: Net income was $1,760,000. Depreciation expense was $430,000. Interest paid was $215,000. Income taxes paid were $107,500. Common stock was sold for $206,000. Preferred stock (8% annual dividend) was sold at par value of $256,000. Common stock dividends of $56,000 were paid. Preferred stock dividends of $20,480 were paid. Equipment with a book value of $106,000 was sold for $212,000. Using the indirect method, what was U Inc.'s net cash flow from operating activities for the year ended December 31, 2021?

Answer 1

Answer:

$2,084,000

Explanation:

Net income -                                 1760000

Add back depreciation                 430000

Les gain on equipment sales

(212000-106000)                          (106000)

                                                        2,084,000

The items of operating activities in the question are the net income , depreciation expenses and gain on the disposal of equipment.

While the depreciation expenses has to be added back being a non cash expenses , the gain on asset disposal is deducted being a non cash income.

The interest and tax paid of no impact to the cash flow as they have already been treated in the income statement.

The other transactions belong to the investing and financing activities of the organization.