Exercise 8 (Net cash provided/used by operating activities – indirect method )

By: Rashid Javed | Updated on: September 8th, 2022

Exercise 8 (a):

The Meta company uses indirect method for preparing its statement of cash flows. It reported a net income of $100,000 for the year 2016.

During the year 2016, the working capital accounts were changed as follows:

  • Increase in accounts receivable: $22,000
  • Increase in accounts payable: $18,600
  • Increase in inventory: $14,800
  • Decrease in non-trade notes payable: $30,000
  • Increase in available for sale securities: $32,000

The depreciation expense was $34,000 for the year 2016.

Required: Compute net cash provided (used) by operating activities using indirect method.

Solution:

The changes in the following working capital items have not been considered in above computation:

Exercise 8 (b):

The Beta company provides only the following information for the year 2016:

  • Net loss: $$35,000
  • Increase in accounts receivable: $4,050
  • Depreciation expense: $42,000

Required: Compute net cash provided (used) by operating activities of Beta company using indirect method.

Solution

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