Software Distributors reports net income of $48,000. Included in that number is depreciation expense of $6,500 and a loss on the sale of lan

Software Distributors reports net income of $48,000. Included in that number is depreciation expense of $6,500 and a loss on the sale of land of $4,300. A comparison of this year’s and last year’s balance sheets reveals a decrease in accounts receivable of $18,000, a decrease in inventory of $11,500, and an increase in accounts payable of $38,000.
Required:Prepare the operating activities section of the statement of cash flows using the indirect method.

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  1. Answer:

    Net cash from operating activities is $126,300.

    Explanation:

    Statement of cash flows

    (Operating activities section only)

    Details                                                                      $      

    Net income                                                         48,000

    Adjustment to reconcile net income:

    Depreciation expense                                         6,500

    Loss on the sale of land                                      4,300

    (Increase) decrease in current assets:

    Decrease in accounts receivable                      18,000

    Decrease in inventory                                         11,500

    Increase (decrease) in current liabilities:

    Increase in accounts payable                           38,000

    Net cash from operating activities                126,300

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