Question

Morrison Corporation's comparative financial statements included the following amounts for the current​ year:

Depreciation expense	​$102,000
Loss on sale of fixed assets	​38,000
Decrease in fixed assets	​155,000
Increase in accounts receivable	​37,000
Decrease in accounts payable	​42,000
Decrease in inventory	​71,000
Increase in taxes payable	​19,000
Net income	​72,000

Compute net cash provided by operating activities using the indirect method.

Answer 1

Formula for calculating the net cash flow from operating activities under indirect method:

Net income

+ Non cash expense

+ Non operating losses

- Non operating gains

+ Decrease in current assets

- Increase in current assets

+ Increase in current liabilities

- Decrease in current liabilities

= Net cash flow from operating activities.

By using the above formula we can calculate cash flow from operating activities under indirect method.