Use the indirect method to answer the following questions. Net income $450 Incre

Question

Use the indirect method to answer the following questions.

Net income                     $450           Increase in plant and equip.    $170

Depreciation expense         80           Payment of dividends 10

Decrease in accts. receiv. 20           Increase in long-term debt 100

Increase in inventories       15           Decrease in accounts payable    30

1. What is net cash flow from operating activities?

          a. $505

          b. $495

          c. $335

          d. $55

2. What is net cash from investing activities?

          a. ($160)

          b. $160

          c. $170

          d. ($170)

3. What is net cash from financing activities?

          a. $70

          b. $60

          c. $90

          d. ($110)

4. What is the change in cash?

          a. $315

          b. $565

          c. $425

          d. $215

Explanation / Answer

1.Net cashflow from operating activities=net income+depriciation expenses+decrease in accounts recievable- increase in inventories-decrease in accounts payable

   =450+80+20-15-30 =$505(ans) 2.Net cash from investing activities=Increase in plant equipment=$170(ans) 3. Net cash from financing activities= increase in longterm debt-payment of divident = -100-10=($110) (ans)

4. change in cash=cash from operating activities+cash from investing activities+cash from financing activities =505+170+(110)=$565(ans)

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