Question

Lighthouse Corporation's accumulated depreciation—equipment account increased by $5,400, while $3,500 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $4,100 from the sale of land.

Reconcile a net income of $61,100 to net cash flow from operating activities.

Answer 1

Solution

Assuming there is no change in working capital the solution is given below

Lighthouse Corporation
Statement of Cash Flows(Partial)
Cash flows from operating activities:
Net income		$ 61,100
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	$ 5,400
Loss on sale of land	$ 4,100
Patent amortization expense	$ 3,500
		$ 13,000
Net cash from Operating Activities		$ 74,100

General notes for cash flow

Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.