Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400. T/F

Question

Justice Riddle

Business

6 January, 06:11

Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400. T/F

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Foxy Lady · Answer 1

True

Explanation:

The net cash flow for the year can be calculated using the following equation:

net cash flow = net income + accounts payable - accounts receivable

net cash flow = $29,500 + $5,400 - $2,500 = $32,400

We have to subtract accounts payable since they were included in the net income but the cash has not been received yet.