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Omni Corporation's accumulated depreciation equipment account increased by $3,800, while $2,500...

Question:

Omni Corporation's accumulated depreciation equipment account increased by $3,800, while $2,500 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $2,900 from the sale of land. Reconcile a net income of $43,200 to net cash flow from operating activities.

Reconciliation of Net Income to Operating Cash Flow:

As the net income is derived by assuming the accrual basis of accounting, in order to determine the net cash flow from operating activities, adjustments related to the noncash expenses, losses, gains on assets, and changes in working capital have to be made to the net income for it to reconcile with the operating cash flow.

Answer and Explanation:


Omni Corporation's net income is reconciled to the net cash flow from operating activities in the following format:

Item Amount
Net income $43,200
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation expense $3,800
Amprtization expense $2,500
Loss on sale of land $2,900
Net cash flows from operating activities $52,400

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
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