Royal Corporation uses the indirect method of computing net cash flow from operating activities and reported the following for 2018: 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 2018 of $157,800 (including $34,800 of depreciation expense),net cash flow from operating activities for 2018 is:
A)$202,400.
B)$132,800.
C)$164,800.
D)$221,700.

Question

Quizplus · Accepted Answer

The net cash flow from operating activities is calculated by adjusting net income for changes in working capital and non-cash expenses. Starting with net income of $157,800, add back depreciation of $34,800. Adjust for changes in working capital: add the decrease in accounts receivable ($10,300), subtract the increase in inventory ($15,300), subtract the decrease in accounts payable ($4,000), and add the increase in income taxes payable ($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