Question

1. Which of the following would be added to net income when using the indirect approach to prepare the cash from operating activities of the Statement of Cash Flows?

a. increase in inventory

b. gain on sale of investments

c. decrease in wages payable

d. decrease in accounts receivable

2. Tripe H Enterprises reported $26,000 of cash from operating activities and the following data:

Depreciation	$45,000
Increase in accounts payable	12,000
Increase in wages payable	8,000
Increase in inventory	9,000
Decrease in taxes payable	2,000

Tripe H's net income/loss for the period was

a. 10,000 income

b. 54,000 loss

c. 28,000 loss

d. 8,000 loss

3. McKim Cringan George reported a cash position of $35,000 and as of December 31, after its first year of operations. McKim also reported the following:

Net Income	$23,000
Depreciation Expense	$17,000
Gain on the sale of equipment	$5,000
Cash from operating activities	$42,000
Cash used in investing activities	$100,000

How much cash was provided through McKim’s financing activities?

a. $100,000

b. $93,000

c. $90,000

d. $0

Answer 1

Question-1

The “Decrease in accounts receivable” shall be added to the net income when using the indirect approach to prepare the cash from operating activities of the Statement of Cash Flows.

Question-2

Net cash provided by operating activities = Net Income + Depreciation + Increase in accounts payable + Increase in wages payable - Increase in inventory - Decrease in taxes payable  

$26,000 = Net Income or (Loss) + $45,000 + $12,000 + $8,000 - $9,000 - $2,000

Net Income / (Loss) = $26,000 - $45,000 - $12,000 - $8,000 + $9,000 + $2,000

Net Loss = $28,000 (Loss)

Therefore, the Tripe H's net income/loss for the period was (c)- 28,000 loss