Royal Corporation uses the indirect method of computing net cash flow from operating activities and reported the following for 2009: accounts receivable decreased by $10,300, merchandise inventory increased by $15,300, accounts payable decreased by $4,000, and income taxes payable increased by $18,800. If Royal Corporation reported net income for 2009 of $157,800 (including $34,800 of depreciation expense), net cash flow from operating activities for 2009 is:
A) $202,400.
B) $132,800.
C) $164,800.
D) $221,700.

Question

Quizplus · Accepted Answer

To calculate net cash flow from operating activities using the indirect method, start with net income and adjust for changes in working capital and non-cash expenses. Start with net income of $157,800, add back depreciation of $34,800, add the decrease in accounts receivable of $10,300, subtract the increase in inventory of $15,300, subtract the decrease in accounts payable of $4,000, and add the increase in income taxes payable of $18,800. The calculation is: $157,800 + $34,800 + $10,300 - $15,300 - $4,000 + $18,800 = $202,400.

Royal Corporation Uses the Indirect Method of Computing Net Cash