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:

Dec. 31, 20Y8 Dec. 31, 20Y7

Accounts receivable $ 6,500 $ 4,900

Inventory 12,300 15,000

Accounts payable 4,800 5,200

Adjust Victor’s net income of $70,000 for changes in current operating assets and liabilities to arrive at net cash flow from operating activities.

Question

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:

	Dec. 31, 20Y8	Dec. 31, 20Y7
Accounts receivable	$ 6,500	$ 4,900
Inventory	12,300	15,000
Accounts payable	4,800	5,200

Adjust Victor’s net income of $70,000 for changes in current operating assets and liabilities to arrive at net cash flow from operating activities.

Accepted Answer

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [latex]\underline{(4,100)} [/latex]

Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $70,700

Question 16.3: Changes in Current Operating Assets and Liabilities—Indirect...

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