Current Attempt in Progress<\/p>\n\n\n\n
Splish Brothers Inc. reported net income of $2 million in 2022. Depreciation for the year was $164,600, accounts receivable decrease $370,900, and accounts payable decreased $252,900. Compute net cash provided by operating activities using the indirect approach. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).<\/p>\n\n\n\n
Splish Brothers Inc. Statement of Cash Flows – Indirect Approach<\/p>\n\n\n\n
Adjustments to reconcile net income to<\/p>\n\n\n\n
The Correct Answer And Explanation is:<\/mark><\/strong><\/p>\n\n\n\n To compute the net cash provided by operating activities<\/strong> using the indirect approach<\/strong>, we start with net income<\/strong> and adjust for non-cash expenses<\/strong> and changes in working capital (current assets and current liabilities)<\/strong>.<\/p>\n\n\n\n Statement of Cash Flows \u2013 Indirect Method<\/strong> Cash Flows from Operating Activities:<\/strong><\/p>\n\n\n\n Net income: ……………………………………………… $2,000,000 Net cash provided by operating activities:<\/strong> …….. $2,282,600<\/strong><\/p>\n\n\n\n The indirect method<\/strong> for preparing the statement of cash flows starts with the net income<\/strong>, which represents the company’s profitability based on accrual accounting. However, accrual accounting includes non-cash items<\/strong> and timing differences<\/strong> that do not directly affect cash flow. Therefore, adjustments are necessary to reconcile net income to the actual cash generated or used by operating activities.<\/p>\n\n\n\n In this scenario, Splish Brothers Inc. reported a net income of $2 million<\/strong>. This is the starting point.<\/p>\n\n\n\n The first adjustment is depreciation<\/strong> of $164,600. Depreciation is a non-cash expense that reduces net income for accounting purposes but does not involve any cash outflow. Therefore, it must be added back<\/strong> to net income to reflect the true cash flow.<\/p>\n\n\n\n Next, there is a decrease in accounts receivable of $370,900<\/strong>. A decrease in receivables means that the company collected more cash from its customers than it recorded in sales revenue, resulting in an increase in cash flow<\/strong>. Therefore, this amount is added<\/strong>.<\/p>\n\n\n\n On the other hand, accounts payable decreased by $252,900<\/strong>. This indicates that the company paid off some of its outstanding obligations, representing a cash outflow<\/strong>. In the indirect method, a decrease in a current liability such as accounts payable is subtracted<\/strong> from net income.<\/p>\n\n\n\n After making these adjustments, the final amount of net cash provided by operating activities<\/strong> is:<\/p>\n\n\n\n This figure represents the actual cash<\/strong> generated from core business operations and is vital for understanding a company’s liquidity and ability to fund operations, pay dividends, and invest in growth.<\/p>\n","protected":false},"excerpt":{"rendered":" Current Attempt in Progress Splish Brothers Inc. reported net income of $2 million in 2022. Depreciation for the year was $164,600, accounts receivable decrease $370,900, and accounts payable decreased $252,900. Compute net cash provided by operating activities using the indirect approach. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-214323","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/214323","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=214323"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/214323\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=214323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=214323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=214323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\n\n\nSplish Brothers Inc.<\/strong><\/h3>\n\n\n\n
For the Year Ended December 31, 2022<\/strong><\/p>\n\n\n\n
Adjustments to reconcile net income to net cash provided by operating activities:<\/p>\n\n\n\n\n
\n\n\n\nExplanation (300+ words)<\/strong><\/h3>\n\n\n\n
$2,000,000 (net income)\n+ $164,600 (depreciation)\n+ $370,900 (decrease in A\/R)\n- $252,900 (decrease in A\/P)\n= $2,282,600\n<\/code><\/pre>\n\n\n\n