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Mohammed Corporation's comparative balance sheet for current assets and liabilities was as follows: Dec. 31, Year...

Mohammed Corporation's comparative balance sheet for current assets and liabilities was as follows: Dec. 31, Year 2 Dec. 31, Year 1 Accounts receivable $30,300 $26,600 Inventory 63,500 73,800 Accounts payable 19,800 16,400 Dividends payable 25,000 27,000 Adjust net income of $124,400 for changes in operating assets and liabilities to arrive at net cash flow from operating activities

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Ans. Particulars Amount
Cash flow from operating activities:
Net income $124,400
Changes in current operating assets and liabilities:
Less: Increase in accounts receivable -$3,700
Add: Decrease in inventory $10,300
Less: Decrease in dividends payable -$2,000
Add: Increase in accounts payable $3,400
Net cash provided by Operating Activities $132,400
*EXPLANATIONS:
*Calculations for Change in balance:
Accounts receivable = $30,300 - $26,600 = $3,700 (increase)
Inventory = $63,500 - $73,800 = $10,300 (decrease)
Accounts payable = $19,800 - $16,400 = $3,400 (Increase)
Dividends payable = $25,000 - $27,000 = $2,000 (decrease)
*Decrease in current liabilities and Increase in current assets other than cash are deducted from Net Income.
*Increase in current liabilities and Decrease in current assets other than cash are added to Net Income.

ekkarill92 answered 2 years ago
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