Adjustments to Net Income—Indirect Method

Omni Corporation’s accumulated depreciation increased by $12,000, while $3,400 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $4,100 from the sale of land. Reconcile Omni’s net income of $50,000 to net cash flow from operating activities.

Question

Adjustments to Net Income—Indirect Method

Omni Corporation’s accumulated depreciation increased by $12,000, while $3,400 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $4,100 from the sale of land. Reconcile Omni’s net income of $50,000 to net cash flow from operating activities.

Accepted Answer

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000

Adjustments to reconcile net income to net cash flow from operating activities:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

Amortization of patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400

Gain from sale of land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [latex]\underline{(4,100)} [/latex]

Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,300

Question 16.2: Adjustments to Net Income—Indirect Method Omni Corporation’s...

Related Answered Questions

Verified Answer:

Cash Payments for Merchandise—Direct Method The cost of merchandise sold reported on the income statement was $145,000. The accounts payable balance increased by $4,000, and the inventory balance increased by $9,000 over the year. Determine the amount of cash paid for merchandise. ...

Verified Answer:

Cash Received from Customers—Direct Method Sales reported on the income statement were $350,000. The accounts receivable balance declined $8,000 over the year. Determine the amount of cash received from customers. ...

Verified Answer:

Land Transactions on the Statement of Cash Flows Alpha Corporation purchased land for $125,000. Later in the year, the company sold a different piece of land with a book value of $165,000 for $200,000. How are the effects of these transactions reported on the statement of cash flows? ...

Verified Answer:

Cash Flows from Operating Activities—Indirect Method Omicron Inc. reported the following data: Net income $120,000 Depreciation expense 12,000 Loss on disposal of equipment 15,000 Increase in accounts receivable 5,000 Decrease in accounts payable 2,000 Prepare the Cash flows from operating ...

Verified Answer:

Verified Answer:

Classifying Cash Flows Identify whether each of the following would be reported as an operating, investing, or financing activity in the statement of cash flows: a. Purchase of patent d. Cash sales b. Payment of cash dividend e. Purchase of treasury stock c. Disposal of equipment f. Payment of ...

Verified Answer: