Multiple Choice
The information reported in the statement of cash flows is organized by which of the following activities?
19
views
13. Statement of Cash Flows
Operating Activities: Indirect Method
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
A company had net income of $240,000. Depreciation expense was $36,000. During the year, the accounts receivable and Inventory increased $12,000 and $25,000, respectively. Accrued expenses and prepaid expenses decreased by $3,000 and $14,000, respectively. There was also a gain on the sale of equipment of $4,000. How much cash was provided by operating activities?
A
$246,000
B
$260,000
C
$263,000
D
$292,000
Verified step by step guidance1
Start with the net income of the company, which is $240,000.
Add back the non-cash depreciation expense of $36,000 to the net income, as it does not affect cash flow.
Adjust for changes in working capital: Subtract the increase in accounts receivable ($12,000) and inventory ($25,000) since these represent cash outflows.
Adjust for changes in liabilities: Add the decrease in accrued expenses ($3,000) and subtract the decrease in prepaid expenses ($14,000) as these affect cash flow.
Subtract the gain on the sale of equipment ($4,000) from the net income, as it is a non-operating activity and should not be included in cash from operating activities.
8:54mWatch next
Master Indirect Method Summary with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Operating Activities: Indirect Method practice set
Problem sets built by lead tutorsExpert video explanations