Use the indirect method to answer questions The following information is available for Felix Company:
$$\begin{array} { l r l r }
\text { Net income } & \$ 300 & \text { Decrease in plant and equip. } & \$ 40 \
\text { Depreciation expense } & 20 & \text { Increase in deferred tax asset } & 5 \
\text { Gain on sale of assets } & 35 & \text { Decrease in long-term debt } & 50 \
\text { Increase in inventories } & 25 & \text { Decrease in accounts payable } & 15
\end{array}$$
-What is the change in cash for Felix Company?
A)$310
B)$205
C)$330
D)$230

Question

Use the indirect method to answer questions The following information is available for Felix Company:
$$\begin{array} { l r l r } 
\text { Net income } & \$ 300 & \text { Decrease in plant and equip. } & \$ 40 \
\text { Depreciation expense } & 20 & \text { Increase in deferred tax asset } & 5 \
\text { Gain on sale of assets } & 35 & \text { Decrease in long-term debt } & 50 \
\text { Increase in inventories } & 25 & \text { Decrease in accounts payable } & 15
\end{array}$$
-What is the change in cash for Felix Company?
A)$310
B)$205
C)$330
D)$230

Quizplus · Accepted Answer

The change in cash is calculated by adjusting net income for non-cash items and changes in working capital. Start with net income ($300), add back depreciation ($20), subtract gain on sale of assets ($35), subtract increase in inventories ($25), subtract increase in deferred tax asset ($5), and subtract decrease in accounts payable ($15). The decrease in plant and equipment and decrease in long-term debt are not included in the operating cash flow calculation. The result is $230.

Use the Indirect Method to Answer Questions the Following Information