Question

Kaila Company's financial statements show a net income of $567,000 in 2019. The following items also appear on Kaila's balance sheet: Depreciation expense $120,000 Accounts receivable decrease 36,000 Inventory increase 84,000 Accounts payable increase 24,000
Using the indirect method, what is Tu's net cash flow from operating activities in 2019?

Answer 1

Answer:

$663,000

Explanation:

Using the indirect method Kaila Company's financial statements

Cash flows from operating activities  Amount in $  

Net income                                           567,000.00  

Depreciation expense                           120,000.00  

Decrease in account receivables             36,000.00  

Increase in inventory                            (84,000.00)

Increase in account payable                     24,000.00  

Net cash flow from operating activities   663,000.00

Depreciation expense is added back as it was deducted from the computation of net income. it is a non cash item hence the addition back. A decrease in current asset represents and inflow of cash while an increase represents an outflow of cash hence, the treatment given to Decrease in account receivables and increase in inventory. An increase in a current liability represents an inflow of cash hence the treatment of Increase in account payable above.

Net cash flow from operating activities is $663,000