The following information is available from the current period financial statements: Net income $175,000 Depreciation Expense $28,000 Increase in Accounts Receivable $16,000 Decrease in Accounts Payable $21,000 The net cash flow from operating activities using the indirect method is:

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Business

Hannah Simpson

26 August, 03:46

The following information is available from the current period financial statements: Net income $175,000 Depreciation Expense $28,000 Increase in Accounts Receivable $16,000 Decrease in Accounts Payable $21,000 The net cash flow from operating activities using the indirect method is:

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Mayo · Answer 1

The net cash flow from operating activities using the indirect method is $166,000

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.

The computation of the net cash flow from operating activities using the indirect method is shown below:

= Net income + depreciation expense - Increase in Accounts Receivable - Decrease in Accounts Payable $21,000

= $175,000 + $28,000 - $16,000 - $21,000

= $166,000