In its most recent financial year Boomerang Ltd reported that accounts payable increased $8 000; inventory decreased $12 000; profit was $68 000 and depreciation expense was $4 000. Using the indirect approach, what is the net cash flow from operating activities that will be reported in the statement of cash flows?

Question

Quizplus · Accepted Answer

Starting with the profit of $68,000, add back the non-cash depreciation expense of $4,000. The increase in accounts payable ($8,000) is added because it represents cash that has not yet been paid out. The decrease in inventory ($12,000) is added because it represents cash that was previously spent and is now released. Therefore, the net cash flow from operating activities is $68,000 + $4,000 + $8,000 + $12,000 = $92,000.

In Its Most Recent Financial Year Boomerang Ltd Reported That