Question

Changes in Current Operating Assets and Liabilities—Indirect Method

Victor Corporation's comparative balance sheet for current assets and liabilities was as follows:

	Dec. 31, Year 2		Dec. 31, Year 1
Accounts receivable	$29,600		$25,500
Inventory	53,900		62,000
Accounts payable	12,600		11,000
Dividends payable	18,000		19,000

Adjust net income of $87,100 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.
$

Answer 1

Solution:

Computation of Cash flow from operating activities
Dec 31, Year 2
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income		$87,100.00
Adjustments to reconcile net income to net cash provided by operating activities:
Increase in Accounts Receivables ($25500 - $29600)	-$4,100.00
Decrease in Invetory ($62000 - $53900)	$8,100.00
Increase in Accounts Payable ($12600 - $11000)	$1,600.00
Total Adjustments		$5,600.00
Net Cash provided by Operating activities		$92,700.00