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    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 Preview

    Using indirect method, we can calculate the CFO from these information.

    Starting from (g) NI = 630000
    (a) minus decrease ...

    Solution Summary

    Cash flow is calculated based on the indirect method. The financial statements of gourmet provisions revealing functions are given.