Stillwater Inc. reported the following information for 2013 and 2014: If Stillwater Inc. uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash flows from operating activities for 2014?

Question

Stillwater Inc. reported the following information for 2013 and 2014:  If Stillwater Inc. uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash flows from operating activities for 2014?

Quizplus · Accepted Answer

Net cash flows from operating activities using the indirect method can be calculated as follows:

Net Income + Depreciation and Amortization - Increase in Accounts Receivable - Decrease in Prepaid Expenses + Increase in Inventory - Increase in Accounts Payable - Increase in Accrued Expenses

For 2014, the calculation would be: 
$120,000 + $20,000 - ($32,000 - $28,000) - ($5,000 - $9,000) + $22,000 - $12,000 - $5,000 = $59,000

Therefore, the correct answer is D.