Laser world reports net income of $520,000. depreciation expense is $37,000, accounts receivable increases $11,000, and accounts payable decreases $17,000. calculate net cash flows from operating activities using the indirect method.

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Dominick Chandler

Business

16 February, 09:32

Laser world reports net income of $520,000. depreciation expense is $37,000, accounts receivable increases $11,000, and accounts payable decreases $17,000. calculate net cash flows from operating activities using the indirect method.

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Bethany Neal · Answer 1

For indirect method, below steps have to be followed: 1. start from net income, which is $520,000 2. Add non-cash expenses, i. e. depreciation. 520,000 + 37,000 = $557,000 3. Account for change in assets, i. e. add sources of cash and subtract use of cash. that makes our cash = 557,000 + (-17,000) + (-11,000); negative sign indicates use of cash which reduced accounts payable and increased accounts receivable i. e net cash flows from operating activities = 557,000 - 17,000 - 11,000 = $529,000