Shippers Ltd made a net operating loss of $42 000.Depreciation expense was $80 000 and loss on sale of vessels was $170 000.Accounts receivable increased by $65 000 and inventory decreased by $18 000.Accounts payable increased by $160 000 and expenses payable decreased by $1000.What was the cash flow from operations?
A) $404 000
B) $320 000
C) ($20 000)
D) None of the answers provided

Question

Quizplus · Accepted Answer

Cash flow from operations can be calculated using the indirect method:

Net loss = $42,000
Add: Depreciation expense = $80,000
Add: Loss on sale of vessels = $170,000
Add: Increase in accounts receivable = $65,000
Subtract: Decrease in inventory = ($18,000)
Add: Increase in accounts payable = $160,000
Subtract: Decrease in expenses payable = ($1,000)

Cash flow from operations = $418,000 - $18,000 - $1,000 = $399,000

Therefore, the correct answer is B) $320,000.

Shippers Ltd Made a Net Operating Loss of $42 000