The net income reported on the income statement for the current year was $275,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Question

The net income reported on the income statement for the current year was $275,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:​  What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Quizplus · Accepted Answer

The formula to calculate cash flows from operating activities using the indirect method is as follows:
Net income + Depreciation/Amortization - Increase in current assets (excluding cash) + Increase in current liabilities (excluding notes payable)

Using the provided information, we can calculate as follows:

Net income = $275,000
Depreciation recorded on fixed assets = $40,000
Amortization of patents = $9,000

Therefore, 
Net cash flow from operating activities = $275,000 + $40,000 + $9,000 - (15,000-5,000) - (50,000-40,000)
= $296,000

Hence, the correct answer is option D.

The Net Income Reported on the Income Statement for the Current