Answer:
net cash from operating activities = $0
Explanation:
given data
net income = $70,000
dividend payment = $10,000
Mortgage repayment = $20,000
Available-for-sale securities purchased = 10,000 increase
Bonds payable = 50,000 increase
Inventory = 40,000 increase
Accounts payable = 30,000 decrease
solution
we get here net cash from operating activities that is express as
net cash from operating activities = net income - inventory increase - accounts payable decrease .......................1
put here value
net cash from operating activities = $70,000 - $40,000 - $30,000
net cash from operating activities = $0
because
- Dividend payments, repayment (mortgage) and debt issuance (bond) financing activities. The purchase of debt or equity instruments (securities available for sale) is an investment activity.
- Operating Cash Flow Investing cash flow excludes this financing. Further, these factors do not affect net income. Consequently, net cash provided by operating activities can be determined by adjusting net income payable in inventory and accounts.
- To differentiate between the cost of goods sold (deducted from income) and cash payments to suppliers, a two-step adjustment is required. The change in inventory is the difference between the prices of goods sold and purchased.
- The difference between the amount payable to buyers and suppliers is the change in accounts payable. Accordingly, an increase in inventories and a reduction in accounts payable is required to change the cost of goods sold to cash paid to suppliers.
