27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Adjustments to net income—indirect method

Ya Wen Corporation’s accumulated depreciation—equipment account increased by $8,750, while $3,250 of patent amortization was recognized between balance sheet dates. These were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $18,750 from the sale of investments. Reconcile a net income of $175,000 to net cash flow from operating activities.

To determine

Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Incometo calculate the net cash provided from operating activities.

Cash flows from operating activities: These are the cash produced by the normal business operations.

The below table shows the way of calculation of cash flows from operating activities:

Cash flows from operating activities (Indirect method)
Add: Decrease in current assets
         Increase in current liability
         Depreciation expense and amortization expense
         Loss on sale of plant assets
Deduct: Increase in current assets
              Decrease in current liabilities
              Gain on sale of plant assets
Net cash provided from or used by operating activities

Table (1)

To Compute: Net cash flows from operating activities under indirect method.


YW Corporation’s 
Statement of Cash Flows - Indirect Method (Partial)
Details Amount ($) Amount ($)
Cash flows from operating activities:
Net income 175,000

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Differentiate between dealer markets and stock markets that have a physical location.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

WACC The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.8 ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)