Brett Limited had a net profit after tax of $850 000 for the financial year.Included in this profit was:
-Depreciation expense of $120 000
-Gain on sale of Investments of $28 000
Also,Accounts Receivable 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

Quizplus · Accepted Answer

The formula to calculate cash flow from operating activities is: 
Net Profit after tax + Depreciation - Gain on sale of investments +/- changes in current assets and liabilities.

Using this formula, we have: 
Net Profit after tax = $850,000 
Depreciation Expense = $120,000 
Gain on sale of investments = $28,000 
Changes in current assets and liabilities = increase in accounts receivable of $39,000 and decrease in inventories of $12,000.

Therefore, the cash flow from operating activities is: 
$850,000 + $120,000 - $28,000 + $39,000 - $12,000 = $969,000.

Thus, the best choice is C.

Brett Limited Had a Net Profit After Tax of $850