Question

Western Inc.'s income statement showed net income of $60,000 and depreciation expense of $10,000. Accounts receivable decreased $3,000, Inventory increased $4,000, Supplies increased $1,000, and Accounts payable increased $3,000. Western's net cash flows from operating activities was ______.

Answer 1

The net cash flows from operating activities for Western Inc. is $75,000.

Step-by-step explanation:

The net cash flows from operating activities can be calculated using the indirect method of the cash flow statement. The formula is:

Net Cash Flows from Operating Activities = Net Income + Depreciation Expense - Increase in Accounts Receivable + Increase in Inventory + Increase in Supplies + Increase in Accounts Payable

In this case, the net cash flows from operating activities would be:

$60,000 + $10,000 - (-$3,000) + $4,000 + $1,000 + $3,000 = $75,000

Answer 2

The net cash flows from operating activities for Western Inc. are calculated by adjusting its net income with changes in working capital and adding back non-cash expenses. The total comes to $71,000.

Step-by-step explanation:

Western Inc.'s net cash flows from operating activities is computed by adjusting the net income for changes in working capital and non-cash expenses like depreciation. In this case, we start with the net income of $60,000 and add back the non-cash depreciation expense of $10,000. Changes in working capital are accounted for by adding the decrease in accounts receivable of $3,000, subtracting the increase in inventory of $4,000, subtracting the increase in supplies of $1,000, and adding the increase in accounts payable of $3,000.

The calculation is as follows:

• Net Income: $60,000
• Add: Depreciation Expense: $10,000
• Add: Decrease in Accounts Receivable: $3,000
• Subtract: Increase in Inventory: ($4,000)
• Subtract: Increase in Supplies: ($1,000)
• Add: Increase in Accounts Payable: $3,000

The total is $60,000 + $10,000 + $3,000 - $4,000 - $1,000 + $3,000 = $71,000. So, Western's net cash flows from operating activities was $71,000.