The following information is available from the financial statements of Worthington Corporation for the year ended December 31, 2011:

What is Worthington Corporation's net cash flow from operating activities?
A) $440,000
B) $466,000
C) $520,000
D) $542,000

Question

The following information is available from the financial statements of Worthington Corporation for the year ended December 31, 2011:

What is Worthington Corporation's net cash flow from operating activities?
A) $440,000 
B) $466,000 
C) $520,000 
D) $542,000

Quizplus · Accepted Answer

Net cash flow from operating activities is calculated using the indirect method. Starting with net income, we add back non-cash expenses such as depreciation and amortization and then adjust for changes in current assets and current liabilities. Using the information provided in the financial statements, we can calculate Worthington Corporation's net cash flow from operating activities as follows:
Net income = $310,000
Add back non-cash expenses:
Depreciation = $130,000
Amortization = $4,000
Total adjustments = $134,000
Adjustments for changes in current assets and liabilities:
Increase in accounts receivable = $18,000
Increase in inventory = $10,000
Increase in prepaid expenses = $2,000
Decrease in accounts payable = $28,000
Decrease in accrued expenses = $6,000
Total adjustments = $52,000
Net cash flow from operating activities = $310,000 + $134,000 - $52,000 = $542,000. Therefore, the correct answer is D.

The Following Information Is Available from the Financial Statements of Worthington