Question

16-2 16-03

Changes in Current Operating Assets and Liabilities—Indirect Method

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

	Dec. 31, Year 2		Dec. 31, Year 1
Accounts receivable	$15,700		$13,300
Inventory	58,700		67,500
Accounts payable	13,900		16,200
Dividends payable	22,000		21,000

Adjust net income of $97,300 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.

Answer 1

Solution:

Computation net cash flow from Operating Acivities
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income		$97,300.00
Adjustments for changes in operating assets and liabilities:
Increase in Accounts Receivables ($13300-$15700)	-$2,400.00
Decrease in Inventory ($67500 - $58700)	$8,800.00
Decrease in Accounts Payable ($13900-$16200)	-$2,300.00
Total Adjustments		$4,100.00
Net Cash Flow From Operating Activites		$1,01,400.00