Monarch Company uses the indirect method to prepare its statement of cash flows. The following information has been gathered for the current period: On the basis of the above information only, Monarch Company's statement of cash flows shows net cash flow from operating activities to be:
A) $187,000.
B) $333,000.
C) $225,000.
D) $361,000.

Question

Quizplus · Accepted Answer

Starting with net income of $180,000, we add back non-cash expenses of depreciation ($73,000) and amortization ($18,000) to get adjusted net income of $271,000. We then subtract the increase in accounts receivable ($11,000), add the increase in accounts payable ($12,000), and subtract the increase in accrued expenses ($45,000) to arrive at net cash flow from operating activities of $225,000.

Monarch Company Uses the Indirect Method to Prepare Its Statement