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24 February, 16:29

The following data are from the accounting records of Kain Company: Net income $40,000 Depreciation expense 8,000 Decrease in accounts payable 1,800 Decrease in merchandise inventory 2,500 Increase in long-term liabilities 10,000 Increase in common stock 25,000 Increase in accounts receivable 4,000 Based on this information, the net cash flows from operating activities on the statement of cash flows using the indirect method would be: a.$51,300. b.$42,100. c.$50,000. d.$44,700.

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  1. 24 February, 16:59
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    d. $44,700

    Explanation:

    The preparation of the Cash Flows from Operating Activities - Indirect Method is shown below:

    Cash flow from Operating activities - Indirect method

    Net income $40,000

    Add : Depreciation expense $8,000

    Less: Decrease in accounts payable - $1,800

    Add: Decrease in merchandise inventory $2,500

    Less: Increase in accounts receivable - $4,000

    Net cash flows from operating activities $44,700

    The long term liabilities and the common stock is not relevant. Hence, ignored it
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