A firm reported $400,000 in net income in 2007. The firm invested $50,000 in equipment during the year and reported a depreciation expense of $21,000. Its account receivable
Decreased by $10,000; its inventory increased by $8,000; its accounts payable increased by
$3,000; and its taxes payable decreased by $2,000. Calculate the firm's operating cash flow.
(Assume no other transactions affected the firm's 2007 cash flow.)

Question

Quizplus · Accepted Answer

Operating cash flow = Net income + Depreciation expense - Increase in accounts payable + Increase in taxes payable - Decrease in accounts receivable - Increase in inventory
= $400,000 + $21,000 - $3,000 + $2,000 - (-$10,000) + $8,000
= $374,000

A Firm Reported $400,000 in Net Income in 2007