Cash Flow from Operations Activities-Indirect Method

question 147

Short Answer

Cash flow from operations activities-indirect method
An analysis of the 2010 financial statements of Portside Provisions reveals the following:
(a) Accounts payable to suppliers of merchandise decreased by $65,000 during 2010.
(b) Dividends of $135,000 were declared in November 2010, to be paid in January 2011.
(c) Dividends of $120,000, declared in November 2009, were paid in January 2010.
(d) Inventory levels increased by $91,000 during 2010.
(e) Depreciation expense for 2010 amounted to $53,000.
(f) Land, which had a cost of $350,000, was sold in 2010 for $400,000 cash, resulting in a gain of $50,000.
(g) Net income for 2010 was $745,000.
Using only the above information, follow the indirect method to compute Portside Provisions' net cash flows from operating activities for 2010.

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Definitions:

Overstate Expenses

To overstate expenses means to report higher expenses than were actually incurred, which can lead to an understatement of net income in financial reporting.

Understate Assets

The incorrect reporting of asset values on the balance sheet, making them appear lower than their actual worth.

Total Assets

The sum of all resources owned by a company, valued in financial terms, and listed on the balance sheet.

Total Expenses

The sum of all costs and expenses incurred by a business or individual in a specific period.