The Black Corporation has provided the following information: Required: Determin

Question

The Black Corporation has provided the following information:

Required:

Determine the cash flow from operating activities using the indirect method of cash flow statement presentation.

Net income $ 560,000 Increase in prepaid expenses    14,000 Amortization of discount on bonds payable 10,000 Decrease in accounts payable 20,000 Increase in inventory 21,000 Dividends declared 39,000 Dividends paid 36,000 Increase in accounts receivable 30,000 Increase in wages payable 16,000 Increase in deferred tax liability 41,000

Explanation / Answer

cash flow from operating activities using the indirect method of cash flow statement.

note:

in calculating cash flow from operating activities using indirect method:

increase in current asset and decrease in current liability are deducted from net income.

decrease in current asset and increase in current liability are added to net income.

Net income $560,000 Add:amortization of discount on bonds 10,000 cash flow before adjustment of current assets and liabilities (560,000+10,000) 570,000 current asset and current liability adjustments: Less: increase in prepaid expenses (14,000) less: decrease in accounts payable (20,000) less: increase in inventory (21,000) less: increase in accounts receivable (30,000) add: increase in wages payable 16,000 add: increase in deferred tax liability 41,000 cash flow from operating activities $542,000

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