The Farley Company had retained earnings at the beginning of the year totaling $100,000.At the end of the year retained earnings totaled $200,000.Depreciation was $50,000 for the year and the company paid dividends of $150,000.What is the amount recorded as Net Income in the operating activities section of the statement of cash flows prepared using the indirect method?
A)a net loss of $150,000
B)a net income of $150,000
C)a net income of $0
D)a net income of $250,000
E)a net loss of $50,000

Question

Quizplus · Accepted Answer

We can use the following formula to calculate the net income:
Net Income = Ending Retained Earnings - Beginning Retained Earnings + Dividends - Depreciation

Substituting the values given in the problem, we get:
Net Income = $200,000 - $100,000 + $150,000 - $50,000
Net Income = $200,000 - $50,000
Net Income = $250,000

Therefore, the amount recorded as Net Income in the operating activities section of the statement of cash flows prepared using the indirect method is $250,000.

The Farley Company Had Retained Earnings at the Beginning of the Year