Carmen's Candies' Net Income was $40,000.Other accounts that changed included: Accounts Receivable decreased by $30,000; Merchandise Inventory increased by $20,000; Accounts Payable decreased by $4,000; and Salaries Payable increased by $1,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Question

Quizplus · Accepted Answer

Net Cash Flow from Operating Activities using the indirect method is calculated by adjusting net income for changes in non-cash accounts and reconciling with cash accounts. 
Starting with net income of $40,000:
- Decrease in accounts receivable ($30,000) is added back because it represents cash that was already earned but not yet received.
- Increase in merchandise inventory ($20,000) is subtracted because it represents cash paid for inventory that is still on hand.
- Decrease in accounts payable ($4,000) is subtracted because it represents cash that was paid out to suppliers.
- Increase in salaries payable ($1,000) is added back because it represents cash that was spent on salaries but not yet paid out.
Therefore, the net cash flow from operating activities using the indirect method is:
$40,000 + $30,000 - $20,000 - $4,000 + $1,000 = $47,000

Carmen's Candies' Net Income Was $40,000