Answer:
The correct option is D,$25,000
Explanation:
The cash flow generated from operating activities in the year can be computed as follows:
Net income $25,000
add depreciation $10,000
add reduction in accounts receivable $4,000
less increase in inventory ($8,000)
add increase in accounts payable $5,000
deduct reduction accrued liabilities ($9,000)
deduct reduction in tax payable ($2,000)
Net cash flow operating activities $25,000
The reduction in current asset is means an inflow of cash.hence added.
The increase in liabilities means the company saved cash that ought to have been paid,hence added as well.
Answer:
d. $25,000
Explanation:
Prepare the Cash flow from Operating Activities Section in the Statement of Cash Flow
Cash flow from operating activities
Net Income $25,000
Adjustment for Non Cash Items:
Increase in Accumulated Depreciation $10,000
Adjustment for Working Capital Items:
Decrease in Accounts receivable $4,000
Increase in Inventory ($8,000)
Increase in Accounts payable 5,000
Decrease in Accrued liabilities ($9,000)
Decrease in Taxes payable ($2,000)
Cash Generated from Operations $25,000
Dividends Paid $10,000
Net Cash from operating Activities $35,000
Note: Dividends Paid can be shown under Financing Activities hence net cash flow from operating activities under the indirect method would be $25,000.
