Brett Limited had a net profit after tax of $850 000 for the financial year. Included in this profit was:
$\bullet$Depreciation expense of $120 000
$\bullet$Gain on disposal of investments of $28 000
Also, Trade Receivables increased by $39 000 and Inventories decreased by $12 000. The cash flow from operating activities during the year was:
A) $731 000;
B) $785 000;
C) $915 000;
D) $969 000.

Question

Brett Limited had a net profit after tax of $850 000 for the financial year. Included in this profit was: 
$\bullet$Depreciation expense of $120 000
$\bullet$Gain on disposal of investments of $28 000
Also, Trade Receivables increased by $39 000 and Inventories decreased by $12 000. The cash flow from operating activities during the year was:
A) $731 000;
B) $785 000;
C) $915 000;
D) $969 000.

Quizplus · Accepted Answer

To calculate the cash flow from operating activities, start with the net profit after tax ($850,000), add back the non-cash expense (depreciation of $120,000), subtract the gain on disposal of investments ($28,000) since it's not an operating activity, adjust for the increase in trade receivables (subtract $39,000 because it's a use of cash), and adjust for the decrease in inventories (add $12,000 because it's a source of cash). The calculation is $850,000 + $120,000 - $28,000 - $39,000 + $12,000 = $915,000.

Brett Limited Had a Net Profit After Tax of $850 ∙\bullet∙

Brett Limited Had a Net Profit After Tax of $850 $\bullet$