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I. Operating ActivitiesNet income $ 50,000II. Long-Term Investing ActivitiesAdditions to property, plant, and equipment $ (250,000)III. Financing ActivitiesNet cash provided by financing activities $ 170,000IV. SummaryNet decrease in cash (30,000)Cash and equivalents at beginning of the year 55,000Cash and equivalents at the end of the year $ 25,000If accruals increased by $25,000, receivables and inventories increased by $100,000, and depreciation and amortization totaled $10,000, what was the firm’s net income?

Question

I. Operating Activities
Net income $ 50,000
II. Long-Term Investing Activities
Additions to property, plant, and equipment $ (250,000)
III. Financing Activities
Net cash provided by financing activities $ 170,000
IV. Summary
Net decrease in cash (30,000)
Cash and equivalents at beginning of the year 55,000
Cash and equivalents at the end of the year $ 25,000
If accruals increased by $25,000, receivables and inventories increased by $100,000, and depreciation and amortization totaled $10,000, what was the firm’s net income?

check_circleAnswer
Step 1

Cashflows provided from Operating activities given is $50000.

Under Indirect method, cashflows from Operating activities is computed as under:

Cashflows from Operating activities = Net Income +Adjustment for Non cash and non operating expenses-Increase in Current assets  +Decrease in current assets +increase in Current liabilities - Decrease in Current liabilities

50000 = Net Income + 10000 (Depreciation)- 100000 (Increase in receivables and inventory)+ 25000 (Increase in accruals)

Net Income =150000-35000 = 115000.

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