The Lincoln Company owns no plant assets and had the following income statement for the year:

Sales revenue $800,000

Cost of goods sold $470,000

Wages expense 120,000

Rent expense 42,000

Insurance expense 15,000 647,000

Net income $153,000

Additional information about the company includes:

End of Year Beginning of Year

Accounts receivable $54,000 $49,000

Inventory 60,000 76,000

Prepaid insurance 8,000 7,000

Accounts payable 24,000 18,000

Wages payable 9,000 11,000

Use the piece ding information to calculate the cash flow from operating activities using the indirect method.

Question

Business

Byron Washington

23 July, 14:25

The Lincoln Company owns no plant assets and had the following income statement for the year:

Sales revenue $800,000

Cost of goods sold $470,000

Wages expense 120,000

Rent expense 42,000

Insurance expense 15,000 647,000

Net income $153,000

Additional information about the company includes:

End of Year Beginning of Year

Accounts receivable $54,000 $49,000

Inventory 60,000 76,000

Prepaid insurance 8,000 7,000

Accounts payable 24,000 18,000

Wages payable 9,000 11,000

Use the piece ding information to calculate the cash flow from operating activities using the indirect method.

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Answers (1)

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Senorita · Answer 1

The correct answer is $167,000.

Explanation:

As per the data given in the question,

We can calculate the cash flow according to Operating activities: are as follows:

Net income = $153,000

Adjusting net income to net cash provided by operating activities

Less. A/cs receivable Increase = $5,000

Inventory = ($16,000)

Less. Prepaid Insurance = $1,000

A/cs payable Increase = $6,000

Less. Wages payable = ($2,000)

Net cash supported by operating activities = $167,000

Net cash flow = $153,000 - $5,000 + $16,000 - $1,000 + $6,000 - $2,000

= $167,000