The records of WXY provided the following information for the year ended December 31, 2011:
(1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
(2) Inventory increased by $4,000.
(3) Accounts payable decreased by $6,000.
(4) Declared a cash dividend, $5,000.
(5) Depreciation expense, $2,000.
(6) Net income, $19,000.
(7) Loss on sale of machine, $3,000.
(8) On December 31, 2011, paid insurance premium on all assets, for 2012 and 2013, $800. There was no prepaid insurance on January 1, 2011.
What was the net cash inflow from operating activities for 2011?
A) $7,200
B) $13,200
C) $16,200
D) $21,200

Question

The records of WXY provided the following information for the year ended December 31, 2011: 
(1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
(2) Inventory increased by $4,000.
(3) Accounts payable decreased by $6,000.
(4) Declared a cash dividend, $5,000.
(5) Depreciation expense, $2,000.
(6) Net income, $19,000.
(7) Loss on sale of machine, $3,000.
(8) On December 31, 2011, paid insurance premium on all assets, for 2012 and 2013, $800. There was no prepaid insurance on January 1, 2011.
What was the net cash inflow from operating activities for 2011?
A) $7,200
B) $13,200
C) $16,200
D) $21,200

Quizplus · Accepted Answer

To calculate the net cash inflow from operating activities, we need to use the indirect method:
Net Income: $19,000
Add back depreciation expenses: $2,000
Add loss on sale of machine: $3,000
Increase in inventory: ($4,000)
Decrease in accounts payable: $6,000
Operating cash flow before changes in working capital: $26,000
Subtract cash dividend: ($5,000)
Net cash inflow from operating activities: $21,000
Therefore, the correct answer is B, $13,200.

The Records of WXY Provided the Following Information for the Year