Question

Using the indirect method, categorize the following transaction to the appropriate activity for the year ended 12/31/21 and indicate the cash effect if any.  

Inventory at December 31, 2020 and 2021, was $200,000 and $250,000, respectively

Answer 1

Category

This section reports cash flows and outflows that stem directly from a company's main business activities. These activities may include buying and selling inventory and supplies, along with paying its employees their salaries.

Such activity is covered under cash flows from operating activities. As per indirect method of computing cash flow statement .

Net cash flows of above activity is shown as adjustment to assets and liabilities from operating cash flows

Answer for net cash flow from above activity is (50000)as increase in current assets in december 2021 with respect to december 2020