The net income reported on the income statement for the current year was $100,000. Depreciation recorded on plant assets was $25,000. Accounts receivable and inventories decreased by $5,000 and $15,000, respectively. Prepaid expenses and accounts payable increased by $500 and $4,000, respectively. Using the indirect method, how much would be reported for net cash flows from operating activities in the statement of cash flows?
A) $130,500
B) $148,500
C) $141,500
D) $98,500

Question

Quizplus · Accepted Answer

The net cash flows from operating activities is calculated by adjusting the net income for changes in working capital and non-cash expenses. Starting with the net income of $100,000, add back depreciation of $25,000. Then, adjust for changes in working capital: add the decrease in accounts receivable ($5,000) and inventories ($15,000), and add the increase in accounts payable ($4,000). Subtract the increase in prepaid expenses ($500). The total is $100,000 + $25,000 + $5,000 + $15,000 + $4,000 - $500 = $148,500.

The Net Income Reported on the Income Statement for the Current