Northington,Inc.is preparing the company's statement of cash flows for the fiscal year just ended.Using the following information,determine the amount of cash flows from operating activities using the indirect method:
$\begin{array}{|l|r|}
\hline \text { Net income } & \$ 182,000 \
\hline \text { Gain on the sale of equipment } & 12,300 \
\hline \text { Proceeds from the sale of equipment } & 92,300 \
\hline \text { Depreciation expense }- \text { equipment } & 50,000 \
\hline \text { Payment of bonds at maturity } & 100,000 \
\hline \text { Purchase of land } & 200,000 \
\hline \text { Issuance of common stock } & 300,000 \
\hline \text { Increase in merchandise inventory } & 35,400 \
\hline \text { Decrease in accounts receivable } & 28,800 \
\hline \text { Increase in accounts payable } & 23,700 \
\hline \text { Payment of cash dividends } & 32,000\
\hline
\end{array}$

Question

Quizplus · Accepted Answer

To calculate cash flows from operating activities using the indirect method, start with net income and adjust for non-cash items and changes in working capital:- Start with net income: $182,000- Subtract gain on sale of equipment (non-cash income): -$12,300- Add back depreciation expense (non-cash expense): +$50,000- Adjust for increase in inventory (use of cash): -$35,400- Adjust for decrease in accounts receivable (source of cash): +$28,800- Adjust for increase in accounts payable (source of cash): +$23,700Calculation: $182,000 - $12,300 + $50,000 - $35,400 + $28,800 + $23,700 = $236,800

Northington,Inc A) $332,200