{"id":219893,"date":"2025-05-27T06:48:35","date_gmt":"2025-05-27T06:48:35","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=219893"},"modified":"2025-05-27T06:48:37","modified_gmt":"2025-05-27T06:48:37","slug":"depreciation-for-the-year-was-164600-accounts-receivable-decrease-370900-and-accounts-payable-decreased-252900","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/27\/depreciation-for-the-year-was-164600-accounts-receivable-decrease-370900-and-accounts-payable-decreased-252900\/","title":{"rendered":"Depreciation for the year was $164,600, accounts receivable decrease $370,900, and accounts payable decreased $252,900."},"content":{"rendered":"\n

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

\n\n\n\n

Splish Brothers Inc.<\/strong><\/h3>\n\n\n\n

Statement of Cash Flows (Partial) \u2013 Indirect Method<\/strong>
For the Year Ended December 31, 2022<\/strong><\/p>\n\n\n\n

Cash Flows from Operating Activities:<\/strong>
Net income ……………………………………………………….. $2,000,000
Adjustments to reconcile net income to
net cash provided by operating activities:
    + Depreciation expense ……………………………….. $164,600
    + Decrease in accounts receivable ……………… $370,900
    \u2013 Decrease in accounts payable ………………….. (252,900)<\/p>\n\n\n\n

Net cash provided by operating activities:<\/strong>
= $2,000,000 + 164,600 + 370,900 \u2013 252,900 = $2,282,600<\/strong><\/p>\n\n\n\n

\n\n\n\n

Explanation <\/h3>\n\n\n\n

The indirect method for reporting cash flows from operating activities begins with net income<\/strong> and adjusts for changes in non-cash items<\/strong> and working capital components<\/strong> (current assets and liabilities). This method helps reconcile the accrual-based net income to the actual cash generated from operations.<\/p>\n\n\n\n

Splish Brothers Inc. reported a net income of $2 million<\/strong> in 2022. Since net income includes non-cash revenues and expenses, it doesn\u2019t reflect the actual cash position. One of the major non-cash expenses is depreciation<\/strong>, which is added back to net income. In this case, depreciation of $164,600<\/strong> is added because it reduced net income but didn\u2019t use cash.<\/p>\n\n\n\n

Next, changes in current assets and liabilities<\/strong> are considered. A decrease in accounts receivable<\/strong> of $370,900 is a positive adjustment because it indicates the company collected more cash from customers than it extended in credit. This increases cash flow.<\/p>\n\n\n\n

On the other hand, a decrease in accounts payable<\/strong> of $252,900 is a negative adjustment. This suggests that the company paid off some of its obligations to suppliers, which results in a cash outflow. Hence, this amount is subtracted.<\/p>\n\n\n\n

After making all adjustments, the net cash provided by operating activities<\/strong> comes out to $2,282,600<\/strong>. This value is crucial for stakeholders to understand the company\u2019s ability to generate cash internally, which is essential for funding operations, paying dividends, and investing in growth without relying on external financing.<\/p>\n\n\n\n

\"\"<\/figure>\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-219893","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/219893","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=219893"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/219893\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=219893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=219893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=219893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}