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Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow...

Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow from operating activities of $193,000 on its statement of cash flows for the year ended December 31. The following information was reported in the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method: Decrease in income taxes payable $3,700 Decrease in inventories 9,300 Depreciation 14,300 Gain on sale of investments 6,400 Increase in accounts payable 2,600 Increase in prepaid expenses 1,600 Increase in accounts receivable 7,000 a. Determine the net income reported by Curwen Inc. for the year ended December 31. $ b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference? Because depreciation expense which has no effect on cash flows from operating activities. Changes in current operating assets and liabilities that are added or deducted. Changes in fixed assets and liabilities that are added or deducted. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements. Pick two.

Solutions

Expert Solution

Cash Flow Statement
Indirect Method
Cash Flow from Operating Activities
Net Income $       185,500
Adjustments
Depreciation $             14,300
Gain on sale of Investments $             -6,400
Changes in Current Assets/ Current Liabilities
Increase in Accounts Receivable $             -7,000
Increase in Prepaid Expenses $             -1,600
Decrease in Inventories $               9,300
Increase in Accounts Payable $               2,600
Decrease in Income Tax Payable $             -3,700
Total Adjustments $            7,500
Cash from Operating Activities $       193,000

Net Income = $185500 i.e. $193000 - $7500

Answer is
Because depreciation expense which has no effect on cash flows from operating activities (as it is non cash expense)
Changes in current operating assets and liabilities that are added or deducted

ekkarill92 answered 1 year ago
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