First National Eatery prepares its statement of cash flows using the indirect method.The statement reported that cash provided by operating activities for the year was $7,000.If the company experienced a $14,000 decrease in accounts receivable, a $13,000 decrease in accounts payable, and a $4,000 increase in inventory during the year, how much is the company's net income/(loss) for the year?

Question

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The net income is calculated by adjusting the cash provided by operating activities for changes in working capital. Starting with $7,000 cash from operations, add the $14,000 decrease in accounts receivable (increases cash), subtract the $13,000 decrease in accounts payable (decreases cash), and subtract the $4,000 increase in inventory (decreases cash). This results in a net income of $2,000.

First National Eatery Prepares Its Statement of Cash Flows Using