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Question

Use the following information to calculate net cash flow from operating activities using indirect method:

Net Income7,000Depreciation Expense 1,000Increase in Accounts Receivable4,400Increase in Prepaid Rent7,000Decrease in Prepaid Insurance1,300Increase in Accounts Payable14,000Increase in Wages Payable 1,000Decrease in Income Tax Payable700Gain on Sale of Equipment1,800


  1. 10,400

  2. 10,000

  3. 9,600

  4. None of these


Solution

The correct option is A

10,400


Cash flows from Operating Activities:Net Income7,000Depreciation Expense 1,000Gain on Sale of Equipment1,800Increase in Accounts Receivable4,400Increase in Prepaid Rent7,000Decrease in Prepaid Insurance1,300Increase in Accounts Payable14,000Increase in Wages Payable 1,000Decrease in Income Tax Payable700Net Cash Flow from Operating Activities10,400

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