Question

Cain Inc. reports net income of $18,000. Its comparative balance sheet shows the following changes: accounts receivable increased $9,000; inventory decreased $11,000; prepaid insurance decreased $4,000; accounts payable increased $6,000 and taxes payable decreased $5,000. Compute cash flows from operations using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Answer:

$25,000

Explanation:

Computation for the cash flows from operations using the indirect method.

Cash flow from operating activities

Net income $18,000

Adjustment to reconcile net income to net cash flow from operating activities

Change in Current assets and liabilities

Less Account receivable increase ($9,000)

Inventory decrease $11,000

Prepaid insurance decrease $4,000

Account payable increase $6,000

Less Taxes payable decrease ($5,000)

Net cash flow from operating activities $25,000

Therefore the cash flows from operations using the indirect method will be $25,000