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Larkspur Company reported net income of $2.4 million in 2020. Depreciation for the year was $505,000, accounts receivable increased $480,500, and accounts payable increased $299,000. Compute net cash flow from operating activities using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

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Answer:

Net Cash flow from operating $2,723,500

Explanation

To determine the net cash flow from operating activities. We will adjust the net income as follows; all decrease in assets and increase in liabilities are added and all increase in assets and decrease in liabilities are subtracted

                                         Larkspur Company   2020

Cash flow from operating activities

                                                     $

Net Income                                2,400,000

Adjustments:

Add depreciation expense         505,000

increase in receivable                  (480,500)  

Increase in  payables                   299,000      

Net Cash flow from operating     2,723,500

Note

All decrease in assets and increase in liabilities are added. All increase in assets and decrease in liabilities are subtracted.

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