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

Question

Butternut

Business

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

+4

Answers (1)

Know the Answer?

Ezra Raymond · Answer 1

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.