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3 May, 16:24

In its statement of cash flows issued for the year ending September 30, Berne Company reported a net cash inflow from operating activities of $123,000. The following adjustments were included in the supplementary schedule reconciling cash flow from operating activities with net income:

Depreciation $38,000

Increase in net accounts receivable 31,000

Decrease in inventory 27,000

Increase in accounts payable 48,000

Increase in interest payable 12,000

Net income is

A. $41,000

B. $29,000

C. $79,000

D. $217,000

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Answers (1)
  1. 3 May, 16:27
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    B. $29,000

    Explanation:

    The cashflow from operating activities is calculated as below:

    Cashflow from operating activities = Net income + Depreciation - Working capital investment

    = Net income + Depreciation - (Change in inventories + Change in account receivables - Change in account payables)

    Putting all the number together, we have:

    123,000 = Net income + 38,000 - [ (-27,000) + 31,000 - 48,000 - 12,000),

    Solve the equation we get Net income = 29,000.
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