Question 16.4: Cash Flows from Operating Activities—Indirect Method Omicron...
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 activities section of the statement of cash flows, using the indirect method.
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Loss on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Changes in current operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,000)
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \underline{(2,000)}
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000