Cartman’s Cats showed the following:
Net Income: $50,000
Depreciation: $10,000
Increase in Accounts Receivable: $15,000
Decrease in Accounts Payable: $15,000
What is the amount of cash from operating activities on the statement of cash flows?
Explanation
Answer - B - The cash from operating activities on the statement of cash flows is $30,000:
Net Income $50,000 +
Depreciation $10,000
Total $60,000 −
Less Increase in A/R $15,000
Total $45,000 +
Less Decrease A/P $15,000
Total $30,000
Key Takeaway: Depreciation is added to net income, then, the total of the increase in A/R and the decrease in A/P is added together and subtracted from the figure. If there is a decrease in A/R, use a negative number. If there is an increase in A/P, use a negative number.
