Moore Company's net income last year was $56,000 and cash dividends declared and paid to the company stockholders was $31,000. Changes in selected balance sheet accounts for the year appear below: Based solely on this information, the net cash flows from operating activities under the indirect method on the statement of cash flows would be

Question

Moore Company's net income last year was $56,000 and cash dividends declared and paid to the company stockholders was $31,000. Changes in selected balance sheet accounts for the year appear below:  Based solely on this information, the net cash flows from operating activities under the indirect method on the statement of cash flows would be

Quizplus · Accepted Answer

Using the indirect method, we start with net income and adjust for non-cash transactions and changes in working capital.

Net income: $56,000

Add non-cash expenses: none given

Subtract non-cash revenues: none given

Adjust for changes in working capital:

Increase in accounts receivable ($18,000)

Decrease in inventory ($9,000)

Increase in accounts payable $13,000

Increase in accrued liabilities $5,000

Net cash flows from operating activities:

$56,000 - $18,000 - $9,000 + $13,000 + $5,000 = $47,000

However, we need to add back the cash dividends paid since they are classified as financing activities, not operating activities:

$47,000 + $31,000 = $78,000

The closest answer choice is D, $83,000. This could be due to rounding or additional information not given in the question.

Moore Company's Net Income Last Year Was $56,000 and Cash