Krenshaw Company reported total sales revenue of $80,000,total expenses of $72,000,and net income of $8,000 for the year ended December 31,2009.During 2009,accounts receivable increased by $3,000,merchandise inventory decreased by $2,000,accounts payable increased by $1,000,and $5,000 in depreciation expense was recorded.Assuming no other adjustments to net income are needed,the net cash inflow from operating activities using the indirect method was:
A) $19,000
B) $13,000
C) $10,000
D) $11,000

Question

Krenshaw Company reported total sales revenue of $80,000,total expenses of $72,000,and net income of $8,000 for the year ended December 31,2009.During 2009,accounts receivable increased by $3,000,merchandise inventory decreased by $2,000,accounts payable increased by $1,000,and $5,000 in depreciation expense was recorded.Assuming no other adjustments to net income are needed,the net cash inflow from operating activities using the indirect method was: 
A) $19,000
B) $13,000
C) $10,000
D) $11,000

Quizplus · Accepted Answer

To calculate net cash inflow using the indirect method, we need to adjust the net income for changes in current asset and liability accounts.

Starting with net income of $8,000, we add back $5,000 in depreciation expense. Then we adjust for increases in accounts receivable and accounts payable, and a decrease in merchandise inventory:

$8,000 (net income) 
+ $5,000 (depreciation expense) 
+ $3,000 (increase in accounts receivable) 
- $1,000 (increase in accounts payable) 
- $2,000 (decrease in merchandise inventory)

= $13,000

Therefore, the answer is B, $13,000.

Krenshaw Company Reported Total Sales Revenue of $80,000,total Expenses of $72,000,and