Question

The following information has been provided to you by Watts Corporation:

Net income	$	175,300
Increase in accounts payable		18,500
Increase in inventory		17,500
Increase in accounts receivable		9,700
Increase in bonds payable		75,000
Amortization of bond premium		5,400
Depreciation expense		21,300
Decrease in income taxes payable		7,300

What is Watts Corporation’s net cash flow from operating activities?

Multiple Choice

• $186,000

• $175,200

• $138,200

• $210,200

Answer 1

Preparing the Cash flow from Operating Activity:-

Particular	Amount in $
Net Income	175,300
Add: Non cash Expenses
Depreciation	21,300
Less: Non Cash Income
Amortization of bond premium	(5400)
Changes in Working Capital
Add; Increase in Accounts Payable	18,500
Less; Increase in inventory	(17,500)
Less: Increase in accounts receivable	(9700)
Less: Decrease in income taxes payable	(7300)
Net cash flow from operating activities	175,200

So, Watts Corporation’s net cash flow from operating activities is $ 186,000

Hence, option B

Note - Increase in bonds payable is a part of Financing Activity so will not form part of Operating Activity

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