Tracy Company reports the following in its statement of cash flows: Net Income $1,000 Depreciation 350 Decrease
Question:
Tracy Company reports the following in its statement of cash flows:
Net Income $1,000
Depreciation 350
Decrease (Increase) in accts. rec. (10)
Decrease (Increase) in inventory 200
Decrease (Increase) in prepaid exp. 80
Decrease (Increase) in trade payables (300)
Decrease (Increase) in taxes payable 75
Cash flow from operations $1,395
Tracy used the indirect method of determining cash flow from operations (CFO). If it had used the direct method:
a. CFO would have been lower as losses and depreciation are not added back in arriving at CFO.
b. it is not possible to determine what CFO would have been without more information.
c. CFO would have been higher as gains are not deducted in arriving at CFO.
d. CFO would have been the same.
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby