During 2016 hamm corporation had a net income of 65,000. included on the income statement was...

During 2016 hamm corporation had a net income of 65,000. included on the income statement was depreciation expense of 28,000. Accounts receivable decreased by 8,200, inventories increased by 5,400 and accounts payable decreased by 14,000. use the indirect method to determine cash flows from operating activities.

Expert Solution

Cash Flow Statement (Partial)


A. Cash Flows from Operating Activity
Net Income		$ 65,000.00
Adjustments to reconcile net income to net cash flows from operating activities
Depreciation expense	$ 28,000.00
Increase in Inventory	$ (5,400.00)
Decrease in Accounts receivables	$ 8,200.00
Decrease in accounts payables	$ (14,000.00)
		$ 16,800.00
Net cash flow from Operating activities		$ 81,800.00

General notes for cash flow

Cash is increased when Current liability increase or Current asset Decrease.

Cash is Decreased when Current liability Decrease or Current asset Increase.

Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash

Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.

ekkarill92 answered 1 year ago

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