Question

Changes in Current Operating Assets and Liabilities—Indirect Method

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

	Dec. 31, Year 2		Dec. 31, Year 1
Accounts receivable	$24,700		$21,500
Inventory	69,300		79,600
Accounts payable	14,300		12,500
Dividends payable	19,000		18,000

Adjust net income of $81,800 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.
$_________

Answer 1

Net Income		$81,800
Adjustments to reconcile net income
Increase in accounts receivables	($3,200)
Decrease in Inventory	$10,300
Increase in accounts payable	$1,800
		$8,900
Net Cash flows from Operating activities		$90,700 ANSWER

No.	Conceptual Notes
1	Cash Flow Statement reflects the Cash Inflows and Outflows during a period of time.
2	Effects of Non - Cash Transaction are adjusted from Net Income.
3	Depreciation Expense, Amortisation expenses are Added back to Net Income in Cash Flow Statement.
4	Decrease in Current Assets OR Increase in Current Liabilities are ADDED to Net Income
5	Increase in Current Assets OR Decrease in Current Liabilities are DEDUCTED from Net Income

--Dividend payable is to be used in Financing activities section.