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?
A) $198,000
B) $324,000
C) $352,000
D) $296,000

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?
A) $198,000 
B) $324,000 
C) $352,000 
D) $296,000

Quizplus · Accepted Answer

The cash flows from operating activities can be calculated using the indirect method as follows:

Net income $275,000 
Add: Depreciation $40,000 
Amortization $9,000 
Decrease in current asset (Accounts receivable) $7,000 
Increase in current liability (Accounts payable) $12,000 
Cash flows from operating activities $296,000

Therefore, the correct answer is D) $296,000.

The Net Income Reported on the Income Statement for the Current