hi all, Jodi Lein, small business consultant, is currently working with RJ Landscaping, a sole proprietorship. She is trying to educate the owner on the importance of monitoring cash flows. Operating information as of the end of the most recent month appears below: Cash from sale of truck of $7,000. Cash salaries paid of $17,000. Cash from customers of $45,000. Depreciation expense of $5,500. Interest on bank line of credit of $1,000. Cash paid to suppliers of $22,000. Other cash expenses, including rent, of $6,300. No taxes due. Using this information, what is the cash flow from operations for the month? A) $11,200. B) -$300. C) -$1,300. D) $4,200. i think d should be the answer . but in schwser it is shown as c as they have not added depreciation . kindly help
depreciation is a non-cash charge
Check the calculus of CFO under direct method, not the indirect method. Cash from sale of truck of $7,000 - this is inflow, CFI Cash salaries paid of $17,000 - this is outflow, CFO Cash from customers of $45,000 - this is inflow, CFO Depreciation expense of $5,500 - this is a non-cash expenditure, considered under the indirect method (when you start with the Net Income and add back depreciation) Interest on bank line of credit of $1,000 - this is an outflow, CFO (remember that under USGAAP interest expense is an operating expense) Cash paid to suppliers of $22,000 - this is an outflow, CFO Other cash expenses, including rent, of $6,300 - this is an outflow, CFO No taxes due - this would be outflow, CFO too, if present -17,000 + 45,000 - 1,000 - 22,000 - 6,300 = -1,300
map1, yes i used indirect method and added depreciation. doesthis mean if net income is not given in question i should assume the question requires direct methord, and depreciation should be ignored
You need to be sure you understand both well enough to create an answer based on whatever they give you.