# Can someone solve this Indirect Cash Flow

Net Income \$1000 Depreciation 70 Purchase of equipment 200 Goodwill Amortization 30 Sale of motor car 25 Sale of common stock 100 Decrease in AR 40 Increase in Inv 35 issuance of bonds 20 Increase in account payable 30 Increase in wage payable 15 Capital stock Exchanged Equipment 10 Calculate the Cash Flow from operating activities

what about this ? Net Income \$1000 Depreciation 70 cashflow out Goodwill Amortization 30 cachflow out Decrease in AR (use) (40) cashflow inn Increase in account payable 30 cash flow out Increase in wage payable 15 cashflow out ------ 1105 Investment Activity Purchase of equipment 200 Sale of motor car 25 Increase in Inv 35 ----------- 260 Financial activity Sale of common stock 100 issuance of bonds 20 -------------------------- 120 Capital stock Exchanged Equipment 10 - Non Cash Transaction Cash = libality + equity - noncash assets (schweser page 42) 955 = 1105 + 120 - (260 + 10)

Goodwill is no longer depreciated/amortized. Only tested for impairment.

If you look at the results thread you can almost hear the sucking noise of all that LI knowledge being wiped clean.

I get this: 1000+70+40-35+30+15… 1120?

CFABlackbelt looks right…

No I don’t think so not one of the choice I was thinking NI 1000 Dep 70 Goodwill 30 Acc R 40 Inv -35 Acc Payable 30 Wage pay 15 Answer 1090. Right or wrong for the operating cash flow

Correct CFA Belt but I think your calculation is wrong. you should I have 1090

good will amortization does not show up on the Statement of Cash flows. 1000 + 70 + 40 - 35 + 30 + 15 = 1155 - 35 = 1120 if you used the amortization goodwill --> it would increase to 1150.

What is the source of this question. It looks like the source is subtracting the amoritization.

Well I m asking about how to calculate cash flow using the indirect method. And I believe in the indirect cash flow all non cash is such as amortization and goodwill is added back.

Can someone tell me that if increase in account payable is cash flow out then y r we adding it?

Regardless of whether you use the Direct or indirect method, I belive you should still come up with the same result. The methods of calculation are different and that is it.

increase of accounts payable – Liability increase or decrease (direct relationship with cash increase / decrease) liability increase --> cash increase (you bought on credit – cash increase) liability decrease --> cash decrease (you paid off your credit balance – cash decrease) Asset increase or decrease – opposite direction for cash --> Cash decrease / increase asset increase – cash decrease (you bought a piece of equipment – cash out) asset decrease – cash increase (you sold a piece of equipment – cash in) CP

in that case, what’s wrong with this ? Net Income \$1000 Depreciation 70 cashflow out Decrease in AR (use) (40) cashflow inn Increase in account payable 30 cash flow out Increase in wage payable 15 cashflow out ------ 1000+70+30+15-40=1075 Investment Activity Purchase of equipment 200 - cach out Sale of motor car 25 cash inn Increase in Inv 35 cash out ----------- 200+35 - 25 = 210 Financial activity Sale of common stock 100 cash INN issuance of bonds 20 cash out -------------------------- 100 - 20 = 80 Capital stock Exchanged Equipment 10 - Non Cash Transaction 1000+70+30+15-40=1075 200+35 - 25 = 210 100 - 20 = 80 Cash = libality + equity - noncash assets (schweser page 42) 945 = 1075 + 80 - 210

Can someone tell me that if increase in account payable is cash flow out then y r we adding it? simple onlly you need to you is that Use: Subtract source: Add an increase in an asset or decrease in liabilities is a use. so you will have to substract a decrease in a asset or increase in liabilities is a source. So you will need to add

Jersey city you forgot to include Inventory

thanks eric, so shouldn’t the answer be 1120?

the possible answer are 1065, 1090, 1135. The book says is the right answer is 1135 I have no clue where they got that answer from.

ajhamb Wrote: ------------------------------------------------------- > Can someone tell me that if increase in account > payable is cash flow out then y r we adding it? You add accounts payable, because its a future decrease in cash. The cash will decrease at a future time, but has not yet done so, thus you have X amount of cash added back to cash flow. Sorry that probably sucked… owell.