Question

Huluduey Corporation’s comparative balance sheet for current assets and liabilities was as follows:

Dec. 31, Year 2	Dec. 31, Year 1
Accounts receivable	$33,340	$27,830
Inventory	18,140	15,290
Accounts payable	15,680	13,780
Dividends payable	52,490	49,220

Adjust net income of $198,140 for changes in operating assets and liabilities to arrive at net cash flow from operating activities. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

Adjust net income of $198,140 for changes in operating assets and liabilities to arrive at net cash flow from operating activities. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

1	Net income	$198,140.00
2	Adjustments to reconcile net income to net cash flow from operating activities:	blank
3	Changes in current operating assets and liabilities:	blank
4	Increase in accounts receivable	?
5	Increase in inventory	?
6	Increase in accounts payable	?
7	Net cash flow from operating activities	?

Answer 1

Solution

Cash flow statement (Partial)
Net income	$ 198,140.00
Adjustments to reconcile net income to net cash flow from operating activities:
Changes in current operating assets and liabilities:
Increase in accounts receivable	$    (5,510.00)
Increase in inventory	$    (2,850.00)
Increase in accounts payable	$     1,900.00
Net cash flow from operating activities	$ 191,680.00

Dividends payable are not adjusted for calculating cash from operations. Dividends payable are used to calculate net dividend paid.

Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.