Tinker Company reported sales revenue of $500,000 and total expenses of $450,000 (including depreciation)for the year ended December 31,2010.During 2010,accounts receivable decreased by $5,000,merchandise inventory increased by $4,000,accounts payable increased by $6,000,and depreciation expense of $10,000 was recorded.Assuming no other data is needed and using the indirect method,the net cash inflow from operating activities for 2010 was:
A) $60,000
B) $67,000
C) $44,000
D) $51,000

Question

Tinker Company reported sales revenue of $500,000 and total expenses of $450,000 (including depreciation)for the year ended December 31,2010.During 2010,accounts receivable decreased by $5,000,merchandise inventory increased by $4,000,accounts payable increased by $6,000,and depreciation expense of $10,000 was recorded.Assuming no other data is needed and using the indirect method,the net cash inflow from operating activities for 2010 was: 
A) $60,000
B) $67,000
C) $44,000
D) $51,000

Quizplus · Accepted Answer

The net income is $50,000 ($500,000 - $450,000). Adjustments for changes in working capital and non-cash expenses are: add back depreciation of $10,000, add $5,000 for the decrease in accounts receivable, subtract $4,000 for the increase in inventory, and add $6,000 for the increase in accounts payable. The net cash inflow from operating activities is $67,000 ($50,000 + $10,000 + $5,000 - $4,000 + $6,000).

Tinker Company Reported Sales Revenue of $500,000 and Total Expenses