Palmer Company\'s net income last year was $73,000 and cash dividends declared a

Question

Palmer Company's net income last year was $73,000 and cash dividends declared and paid to the company's stockholders totaled $14,000. Changes in selected balance sheet accounts for the year appear below: Increases (Decreases) Debit balances: Accounts receivable $10,000 Prepaid expenses $(3,000) Credit balances: Accumulated depreciation $16,000 Accounts payable $(4,000) Bonds payable $80,000 Based solely on this information, the net cash provided by operations under the indirect method on the statement of cash flows would be: A) $89,000 B) $78,000 C) $68,000 D) $154,000

Explanation / Answer

Answer is (B)

Palmer Company Statement of Cashflow Cash flow from operations (Indirect method) Net Income $       73,000 Add: Non cash items Depreciation expense $           16,000 $       16,000 Changes in working Capital Increase in Accounts Receivable $         -10,000 Decrease in prepaid expenses $             3,000 Decrease in Accounts payable $            -4,000 $      -11,000 Cashflow from Operations $       78,000

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