Trundle Corporation reported net income of $40,000; depreciation expense of $1,000; sales of additional common shares of $25,000; and a decrease in Accounts Payable of $8,000.Net cash flow from operating activities using the indirect method is:

Question

Quizplus · Accepted Answer

The indirect method starts with net income and adjusts for changes in non-cash items and changes in working capital.

Starting with net income:

Net income = $40,000

Then we add back in non-cash expenses (in this case, only depreciation):

Depreciation = $1,000

Net income + depreciation = $41,000

Next, we adjust for changes in working capital. Since there was a decrease in Accounts Payable of $8,000, we add that back in:

Net income + depreciation + increase in Accounts Payable = $33,000

Finally, we add or subtract any other changes in current assets and liabilities, but in this question there are no other changes mentioned.

Therefore, the net cash flow from operating activities using the indirect method is $33,000.

Trundle Corporation Reported Net Income of $40,000; Depreciation Expense of $1,000;