The following data is provided for last year. Net income was $30,000. Current assets (other than cash)increased by $12,000 and current liabilities increased by $8,000. Under the indirect method, the cash flows from operating activities would be:
A)$34,000.
B)$10,000.
C)$30,000.
D)$26,000.

Question

Quizplus · Accepted Answer

The cash flows from operating activities under the indirect method can be calculated as:
Net income + Depreciation and amortization - Increase in current assets (other than cash) + Increase in current liabilities
= $30,000 + Depreciation and amortization - $12,000 + $8,000
Since no depreciation or amortization is given, we assume it to be zero.
Therefore, cash flows from operating activities = $30,000 - $12,000 + $8,000
= $26,000

The Following Data Is Provided for Last Year