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The records of Best Color Engraving reveal the following:
Compute cash flows from operating activities by the indirect method for year ended December 31, 2018.
S 41,000 Depreciation expense Net income Sales revenue Loss on sale of land Acquisition of land S 3,000 18,000 6,000 49,000 Decrease in current liabilities Increase in current assets other 5,500 than cash 38,000
Expert Answer
| PArticulars | Amout($) |
| Net income | $41000 |
| Add:loss on sales of land | $5500 |
| Add:Deprecaition expense | $3000 |
| Less:Decrease in current liabilities | ($18000) |
| Less:Increase in current assets other than cash | ($6000) |
| Net cash flow from operating activities | $25500. |
Decrease in current liabilities is an outflow of cash while decrease in current assets is an inflow and hence added to the cash flow from operations and vice-versa.All non-cash expenses are added back to the net income to compute cash flow from operations as well and non cash incomes subtracted.
