Adjustments to Cash Flow from Operating Activities

Medium Financial Statements Cash Flow Statement

ABC Manufacturing is analyzing its cash flow statement for the year ended December 31, 2023. The statement shows that the company generated net income of $500,000. However, during this period, ABC had a decrease in accounts receivable of $50,000 and an increase in inventory of $30,000. Additionally, there was a gain on the sale of equipment amounting to $20,000, and depreciation expense recorded was $60,000. Which of the following adjustments should be made to calculate the cash flow from operating activities using the indirect method?

Subtract the gain on sale of equipment, add depreciation expense, add change in accounts receivable, less change in inventory.

Add the gain on sale of equipment, subtract depreciation expense, add change in accounts receivable, add change in inventory.

Subtract the gain on sale of equipment, add depreciation expense, subtract change in accounts receivable, add change in inventory.

Hint

Submitted17.3K

Correct8.1K

% Correct47%