Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, how much is net cash provided by operations?

Question

Business

Aryan Warner

6 January, 05:37

Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, how much is net cash provided by operations?

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Answers (1)

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Avery Garrison · Answer 1

The correct answer to the following question is $136,000.

Explanation:

When in the cash flow statement, the indirect method is used to calculate the cash flow from operating activities, then we will first start with net income and in that we will make necessary adjustments. In this method we will add the increase in current liabilities and decrease in current asset, also we will subtract the decrease in current liability and increase in current asset.

So here the net income - $132,000

+ $6000 (decrease in current asset)

+ $10,000 (increase in current liability)

- $12,000 (increase in current assets)

= $136,000