Question 16.3: Changes in Current Operating Assets and Liabilities—Indirect......
Changes in Current Operating Assets and Liabilities—Indirect Method
Victor Corporation’s current operating assets and liabilities from the company’s comparative balance sheet were as follows:
Adjust Victor’s net income of $70,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities.
| Dec.31, 2013 | Dec.31, 2012 | |||
| Accounts receivable | $ 6,500 | $ 4,900 | ||
| Inventory | 12,300 | 15,000 | ||
| Accounts payable | 4,800 | 5,200 | ||
| Dividends payable | 5,000 | 4,000 | ||
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $70,000
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . (1,600)
Decrease in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . \underline{(400)}
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . $70,700
Note: The change in dividends payable impacts the cash paid for dividends, which is disclosed under financing activities