Nordstrand Company’s net income last year was $36,000. Changes in selected balan

Question

Nordstrand Company’s net income last year was
$36,000. Changes in selected balance sheet accounts
for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . $ (7,000)
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,000)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . $ 3,000
Credit balances:
Accumulated depreciation . . . . . . . . . . . . . . . . $18,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $13,000
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . $(9,000)
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . .$ 0
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . $1,000
Based solely on this information, the net cash provided
by operations under the indirect method on the statement
of cash flows would be how much?

Explanation / Answer

Cash flow from operating activities (Indirect method): Net income $36,000 Add: Cash in flows due to operating activities: Decreased in accounts receivable $7,000 Decreased in inventory $5,000 Increase in accounts payable $13,000 Increase in diferred tax $1,000 $26,000 Less: Cash out flows due to operating activities: Increase in prepaid expense ($3,000) Decrease in accrued liabilities ($9,000) ($12,000) Net cash flow from operating activities: $50,000 Note: Current year depreciation expenses has to add but here given only accumulated depreciation. So we can't estimate and deduct current year expenses. Thank you.... Net income $36,000 Add: Cash in flows due to operating activities: Decreased in accounts receivable $7,000 Decreased in inventory $5,000 Increase in accounts payable $13,000 Increase in diferred tax $1,000 $26,000 Less: Cash out flows due to operating activities: Increase in prepaid expense ($3,000) Decrease in accrued liabilities ($9,000) ($12,000) Net cash flow from operating activities: $50,000

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