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?
A) $49,000
B) $55,000
C) $57,000
D) $59,000

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?
A) $49,000 
B) $55,000 
C) $57,000 
D) $59,000

Quizplus · Accepted Answer

Net cash flows from operating activities can be calculated using the indirect method by adjusting the net income for non-cash items and changes in working capital. Using the information provided in the table, we can calculate the net cash flows from operating activities for 2014 as follows:
Net income: $40,000
Depreciation expense: $10,000
Decrease in accounts receivable: $3,000
Increase in accounts payable: $6,000
Net cash flows from operating activities: $40,000 + $10,000 - $3,000 + $6,000 = $53,000
Therefore, the correct answer is D) $59,000.