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|
|Bond premium amortization||64,100|
|Provision for doubtful accounts:|
|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:
|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|
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.
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from Finance 101: Principles of FinanceChapter 10 / Lesson 4