The data given below are from the accounting records of the kuhn corporation: net income (accrual basis) $ 65,000 depreciation expense

Question

The following data are extracted from the accounting records of the Kuhn Corporation:

Net income (accrual basis): $65,000 
Depreciation expense: $19,000 
Decrease in accounts payable: $3,500 
Decrease in inventory: $4,000 
Increase in bonds payable: $20,000 
Sale of common stock for cash: $32,000 
Increase in accounts receivable: $6,500

Based on this information, what is the net cash provided by (or used in) operating activities using the indirect method?

Anonymous · Accepted Answer

Explanation:Operating activities : It includes all activities related to the changes in the working capital or changes in the current assets and current liabilities. The increase in current liabilities increase the cash and decrease in current liabilities decrease the cash, so the adjustment is made accordingly. But it is opposite with the current assets. The Net cash in operating activities under indirect method is shown below: = Net income + Depreciation expense - decrease in accounts payable + decrease in inventory - increase in accounts receivable= $65,000 + $19,000 - $3,500 + $4,000 - $6,500= $78,000The other effect like increase in bond payable, sale of common stock for cash is classified under financing activities. Thus, it is not considered in computation part. Hence, the Net cash in operating activities under indirect method is $78,000

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The data given below are from the accounting records of the kuhn corporation: net income (accrual basis) $ 65,000 depreciation expense

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