Answer: $215,000
Explanation: Using the indirect method, Net cash by Darwin company is given
= Net Cash Flow from Operating Activities of Darwin Company.
Net income $200,000
Accounts receivable (subtract) $18,000
Prepaid insurance increase (subtract ) $7,000
Depreciation expense (add) $25,000
Loss on sale of a building (add) $22,000
Wages payable increased (add) $14,000
Unearned revenue decreased ( subtract ) $21,000
Net Cash Flow $215,000
In general, the formula for calculating indirect method for Net Cash Flow is Net Income +Non-Cash Expenses:(Depreciation, Depletion & Amortization Expense)+Non-Operating Losses:
(Loss on Sale of Non-Current Assets) − Non-Operating Gains: (Gain on Sale of Non-Current Assets) + Decrease in Current Assets:(Accounts Receivable, Prepaid Expenses, Inventory etc.) − Increase in Current Assets+Increase in Current Liabilities:(Accounts Payable, Accrued Liabilities, Income Tax Payable etc.) − Decrease in Current Liabilities (from xplaind.com)
According to the indirect method, Our Net cash flow will be
Net cash flow =Net income - (Accounts receivable increase + prepaid insurance increase + unearned revenue decrease ) + (Depreciation expense + loss on sale of building + wages payable increase)
Net Cash flow=$200,000 -($18,000+$7,000+$21,000) + (25,000+22,000 14,000)= $215,000
