A company had net income of $245,130. Depreciation expense was $20,107. During the year, accounts receivable and inventory increased by $14,733 and $29,685, respectively. Prepaid expenses and accounts payable decreased by $3,608 and $5,431, respectively. There was also a loss on the sale of equipment of $3,668. How much was the net cash flow from operating activities on the statement of cash flows using the indirect method? a.$215,328

$222,664

Explanation:

The cash flow statement categories the company's transactions in a financial period into 3 groups; these are operating, investing and financing.

The net profit/loss, depreciation, changes in current assets (other than cash) and liabilities are considered as operating activities including income taxes.  

The sale of assets, interest received, purchase of investments are examples of investing activities while the issuance of stocks, debt principal deduction (loan settlement), issuance of debt securities etc are examples of financing activities.

An increase in assets other than cash is an outflow while an increase in liabilities is an inflow. Depreciation and other non-cash expenses deducted in the income statements are added back while the non-cash income such gain on asset are deducted from net income.

The net cash flow from operating activities

= $245,130 + $20,107 -  $14,733 - $29,685 + $3,608 - $5,431 + $3,668

= $222,664

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