The data given below are from the accounting records of Kain Company: 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)$50,000.
C)$42,100.
D)$44,700.

Question

The data given below are from the accounting records of Kain Company:  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)$50,000. 
C)$42,100. 
D)$44,700.

Quizplus · Accepted Answer

The net cash flows from operating activities can be calculated using the indirect method by starting with net income and making adjustments for non-cash items and changes in working capital. 
Starting with net income of $30,000 and adding back depreciation expense of $19,000 yields a total of $49,000. 
Then, subtracting the increase in accounts receivable of $2,300, adding the increase in prepaid expenses of $1,000, subtracting the decrease in accounts payable of $2,300, and subtracting the decrease in accrued expenses payable of $500 yields a total of $44,700 as the net cash flows from operating activities. Therefore, the correct answer is (D) $44,700.

The Data Given Below Are from the Accounting Records of Kain