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Marigold Corp., had net income for 2018 of $53,60,000. Additional information is as follows: ...

Question:

Marigold Corp., had net income for 2018 of $53,60,000. Additional information is as follows:

Amortization of patents $44,400
Depreciation on plant assets 16,58,000
Long-term debt:
Bond premium amortization 64,100
Interest paid 8,91,000
Provision for doubtful accounts:
Current receivables 80,000
Long-term nontrade receivables 31,000

What should be the net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2018, based solely on the above information?

Operating Cash Flow:

The net cash from operating activities can be calculated in two ways: the direct method and the indirect method. Under the direct method, all operating cash collections and cash payments are considered. Under the indirect method, the net income is taken as the base and adjustments are made to arrive at the net cash flow from operating activities.

Answer and Explanation:


Computation of net cash from operating activities:


Description Amount($) Amount($)
Net income $5,360,000
Adjustments for:
   Depreciation on equipment $1,658,000.00
   Amortization of patent $44,400.00
   Amortization of bond premium -$64,100.00 $1,638,300
Net cash flow from operating activities $6,998,300


Note:

Provision for doubtful debts do not directly affect the net income. However, if the bad debt expense for the year had been provided, it should be added back to the net income.


Learn more about this topic:

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
10K

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