Accounting: Cash Flow - Indirect Method
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8. Cash flow from operations activities-indirect method
An analysis of the 2001 financial statements of Gourmet Provisions reveals the following:
(a) Accounts payable to suppliers of merchandise decreased by $40,000 during 2001.
(b) Dividends of$120,000 were declared in November 2001, to be paid in Januazy 2002.
(c) Dividends of $105,000, declared in November 2000, were paid in Januaiy 2001.
(d) Inventory levels increased by $76,000 during 2001.
(e) Depreciation expense for 2001 amounted to $39,000.
(f) Land, which had a cost of $200,000, was sold in 2001 for $320,000 cash, resulting in a
gain of S 120,000.
(g) Net income for 2001 was $630,000.
Using only the above information, follow the indirect method to compute Gourmet Provisions' net cash flow from operating activities for 2001.
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Solution Summary
Cash flow is calculated based on the indirect method. The financial statements of gourmet provisions revealing functions are given.
Solution Preview
Using indirect method, we can calculate the CFO from these information.
Starting from (g) NI = 630000
(a) minus decrease ...
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