Question

Jackson Company gathered the following data to prepare its 20X7 statement of cash flows: Profit $40,000...

Jackson Company gathered the following data to prepare its 20X7 statement of cash flows:

Profit $40,000

Depreciation expense 5,000

Trade receivables decrease 3,000

Wages payable increase 4,000

Amortization of patent 1,000

Income tax payable decrease 2,000

Based only on the above data, the net cash inflow from operating activities during 20X7 was which of the following?

A - $51,000.

B - $53,000.

C - $45,000.

D - $43,000.

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Homework Answers

Answer #1

Any decrease in accounts receivable is to be added to the net profit where is any increase in payable will also be added in the profit. Depreciation and amortization and non cash activities and therefore they are added back to the net profit. Decrease in tax payable is to be reduced from the net profit

Cash flow from operating activities

Net profit =. 40,000

Depreciation = 5,000

Decrease in trade receivables = 3,000

Increase in payable = 4,000

Amortization of patent = 1,000

Income tax payable decrease = (2,000)

Net cash flow from operating activities

= 40,000 + 5,000 + 3,000 + 4,000 + 1,000 - 2,000

= $51,000

So the correct option is A

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