Bankers Company reported net income of $40,000, which included depreciation expe

Question

Bankers Company reported net income of $40,000, which included depreciation expense of $39,000. The following changes also occurred during 2014:

Inventory

$10,000

decrease

Accounts payable

5,000

decrease

Notes payable (long-term)

15,000

decrease

Income taxes payable

7,000

increase

Accounts receivable

10,000

increase

Calculate cash flows from operating activities.

Inventory

$10,000

decrease

Accounts payable

5,000

decrease

Notes payable (long-term)

15,000

decrease

Income taxes payable

7,000

increase

Accounts receivable

10,000

increase

Explanation / Answer

Hi,

Please find the detailed answer as follows;

Cash Flow from Operating Activities = Net Income Including Depreciation + Decrease in Inventory + Increase in Income Taxes Payable - Increase in Accounts Receivable - Decrease in Accounts Payable = 40000 + 10000 + 7000 - 10000 - 5000 = $42000

Answer is $42000.

Thanks.

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