Kensington Industries reported net income of £50,000 in 2012.Depreciation expense was £19,000.
The following working capital accounts changed:
If Kensington uses IFRS reporting and the indirect method, what amount is their adjustments to reconcile net income to net cash provided by or (used in) operating activities?

Question

Quizplus · Accepted Answer

To calculate the adjustments to reconcile net income to net cash provided by or (used in) operating activities, we need to consider changes in working capital accounts.
Here are the changes given:
Accounts receivable increased by £6,000
Inventory decreased by £9,000
Accounts payable increased by £7,000
To calculate adjustments using the indirect method:
Depreciation expense is added back to net income: £19,000
Increase in Accounts receivable is subtracted: -£6,000
Decrease in Inventory is added: £9,000
Increase in Accounts payable is added: £7,000
Total adjustments: £19,000 - £6,000 + £9,000 + £7,000 = £29,000
Therefore, the correct choice is C: £12,900.

Kensington Industries Reported Net Income of £50,000 in 2012