Question

Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow...

Determining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $165,200 on its statement of cash flows for the year ended December 31. The following information was reported in the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method:

Decrease in income taxes payable$3,100

Decrease in inventories7,700

Depreciation11,900

Gain on sale of investments5,400

Increase in accounts payable2,100

Increase in prepaid expenses1,300

Increase in accounts receivable5,800

a. Determine the net income reported by Curwen Inc. for the year ended December 31.
$

b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference?

Because depreciation expense which has no effect on cash flows from operating activities.

Changes in current operating assets and liabilities that are added or deducted.

Changes in fixed assets and liabilities that are added or deducted.

Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.

Homework Answers

Answer #1

a) Net income

Cash flow from operating activities 165200
Decrease in income tax payable 3100
Decrease inventories -7700
Depreciation -11900
Gain on sale of investment 5400
Increase in account payable -2100
Increase in prepaid expense 1300
Increase in account receivable 5800
Net income 159100

b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference?

So answer is a) Because depreciation expense which has no effect on cash flows from operating activities.

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