Question

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	$16,700		$21,100
Inventory	57,600		50,500
Accounts payable	17,100		21,900
Dividends payable	26,000		28,000

Adjust net income of $129,100 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.
$

Answer 1

Statement of Cash Flow
Cash flow from operating activities:
Net income	$129,100
Adjustment for changes in operating assets and liabilities to arrive at net cash flow from operating activities
Add: decrease in Accounts receivable ($21,100 - $16700)	$4,400
Less: Increases in Inventory increase (50,500-57,600)	$(7,100)
Less: Decrease in Accounts payable (17,100-21900)	$(4,800)
Net cash provided by Operating activities	$121,600