Ocean Pines Company had net income $450,000. They also had depreciation expense of $150,000, an...


Ocean Pines Company had net income $450,000. They also had depreciation expense of $150,000, an increase or (decrease) in accounts receivable of $-50,000, and an increase or (decrease) in inventory of $35,000. Ocean Pines prepares their Statement of Cash Flows using the indirect method. Use this information to determine the dollar value of cash provided or (used) by operating activities. If the total is a use of cash, enter as a negative number. (a negative number for accounts receivable or inventory indicates that the balance decreased)

Cash flow Statement:

The cash flow statement is calculated between two dates, and the detail of the opening and closing cash account is shown. The cash flow statement shows the details of cash inflow and outflow in the operating activities, investing activities, and financing activities

Answer and Explanation:

The points to be followed to calculate the net cash used or provided by the operating activities are given below

  • First, the net profit/loss as per income statement is shown at the top
  • Then all non-cash accounts will be added back
  • The changes in working capital are shown as below
  • An increase in an asset is a use of cash and a decrease in an asset is a source of cash
  • An increase in a liability or equity account is a source of cash, and a decrease in a liability or equity account is a use of cash.

The net cash flow from operating activities of Ocean Pines Company is calculated below

Cash flows from operating activities
Net Profit /(loss) $450,000.00
Adjustments for non cash items:
Add :-Depreciation expense $150,000.00
Working capital changes:
(Increase) / Decrease in accounts receivables $50,000.00
(Increase) / Decrease in inventories -$35,000.00
Net cash from operating activities $615,000.00

The net cash flow provided from operating activities is $615,000

Learn more about this topic:

Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4

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