Nevada Boot Co. reported net income of $216,000 for its year ended December 31, 2013. Purchases totaled $152,000. Accounts payable balances at the beginning and end of the year were $36,000 and $33,000, respectively. Beginning and ending inventory balances were $44,000 and $46,000, respectively. Assuming that all relevant information has been presented, Nevada Boot would report operating cash flows of:

Question

Quizplus · Accepted Answer

To calculate operating cash flows using the indirect method, we start with net income and make adjustments for non-cash expenses (i.e. depreciation) and changes in current assets and liabilities. 
Operating cash flows = net income + depreciation - increase in accounts payable + increase in inventory
Operating cash flows = $216,000 + $0 - ($33,000 - $36,000) + ($46,000 - $44,000)
Operating cash flows = $211,000