Software distributors reports net income of $65,000. included in that number is depreciation expense of $15,000 and a loss on the sale of land of $6,000. a comparison of this year's and last year's balance sheets reveals a decrease in accounts receivable of $28,000, a decrease in inventory of $37,000, and an increase in accounts payable of $45,000.

cash generated from operating activities 196,000

Explanation:

We have to detemrinate the cash generated from operating activities using indirect method:

net income                  65,000

non-monetary adjustment

depreciation expense 15,000

loss on sale of land       6,000  

adjusted income         86,000

changes in working capital*

A/R decrease             28,000

Inventory decrease   37,000

increase in A/P         45,000  

net change                110,000

cash generated from operating activities 196,000

*decrease in assets represent were converted int cash

while increase of liabilities represent the delayment of cash outlay

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