Dennis Corporation prepared the following data (in dollars)for the current year: $\begin{array}{lrr}
\text { Increase in accounts receivable } &\$6,000\
\text { Decrease in inventory } &2,400\
\text { Increase in prepaid expenses} &1,600\
\text { Depreciation expense, equipment } &7,000\
\text { Loss on sale of equipment } &1,500\
\text { Net income} &130,000\
\end{array}$
Using the indirect method,what is the net cash flow from operating activities?
A) $146,800
B) $133,300
C) $101,200
D) $118,000

Question

Dennis Corporation prepared the following data (in dollars)for the current year: $\begin{array}{lrr}
  \text { Increase in accounts receivable } &\$6,000\
 \text { Decrease in inventory  } &2,400\
 \text {  Increase in prepaid expenses} &1,600\
 \text { Depreciation expense, equipment } &7,000\
 \text { Loss on sale of equipment } &1,500\
 \text {  Net income} &130,000\
\end{array}$
 Using the indirect method,what is the net cash flow from operating activities?
A) $146,800
B) $133,300
C) $101,200
D) $118,000

Quizplus · Accepted Answer

The net cash flow from operating activities can be calculated by adjusting net income for non-cash items and changes in current assets and liabilities. Using the indirect method, we start with net income of $142,000 and add back depreciation of $15,500 and decrease in accounts payable of $3,200, and subtract increase in accounts receivable of $21,000, decrease in prepaid expenses of $6,700, and increase in inventory of $2,500. This gives us a net cash flow from operating activities of $133,300.

Dennis Corporation Prepared the Following Data (In Dollars)for the Current