4. assuming net income for the year is $245,000 and consider the following information, what is the net cash…

4. assuming net income for the year is $245,000 and consider the following information, what is the net cash flows from operating activities? increase in salaries payable $16,000 depreciation expense 5,000 increase in prepaid rent 25,500 loss on sale of asset 1,350 increase in accounts payable 34,500 increase in inventory 69,000 multiple choice $207,350 $338,150 $232,850 $237,850

4. assuming net income for the year is $245,000 and consider the following information, what is the net cash flows from operating activities? increase in salaries payable $16,000 depreciation expense 5,000 increase in prepaid rent 25,500 loss on sale of asset 1,350 increase in accounts payable 34,500 increase in inventory 69,000 multiple choice $207,350 $338,150 $232,850 $237,850

Answer

Explanation:

Step1: Add non - cash expenses

Net income is adjusted by adding back non - cash expenses like depreciation. Depreciation expense is added as it is a non - cash charge that reduced net income. $245000 + 5000$

Step2: Add losses

Loss on sale of asset is added as it is a non - operating loss that reduced net income but did not involve a cash outflow. $245000+5000 + 1350$

Step3: Adjust for working capital changes

  • Increase in salaries payable and accounts payable are added as they represent an increase in liabilities (delayed cash outflows). So we add $16000+34500$.
  • Increase in prepaid rent and inventory are subtracted as they represent an increase in assets (cash outflows). So we subtract $25500 + 69000$. [ \begin{align*} &(245000+5000 + 1350)+(16000+34500)-(25500 + 69000)\ =&251350+50500 - 94500\ =&301850-94500\ =&207350 \end{align*} ]

Answer:

$207350$