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Brief Exercise 12-05 The net income for Swifty Corporation for 2020 was $260,100
Brief Exercise 12-05 The net income for Swifty Corporation for 2020 was $260,100. For 2020, depreciation on plant assets was $67,800, and the company incurred a loss on disposal of plant assets of $11,100. Compute net cash provided by operating activities under the indirect method, assuming there were no other relevant changes in the company's accounts. (Show amounts that decrease cash flow with either a - sign e.g.-15,000 or in parenthesis e.g. (15,000).) Swifty Corporation Statement of Cash Flows-Indirect Method Adjustments to reconcile net income to Click if you would like to Show Work for this question:
Expert Solution
Computation of Net cash Flow from operating activities (indirect method)
| Particulars | Amount ($) |
| Net income for the year 2020 | 260,100 |
| Adjustments to reconcile net income: | |
| +Depreciation on plant assets | 67,800 |
| +Loss on disposal of plant assets | 11,100 |
| Net cash Provided by operating activities : | 339,000 |
Notes:
- Depreciation is a non cash activity hence it should be added back to the net income.
- Loss on sale of plant asset is shown in the income statement and thereby reducing the Net income it does not have any impact on cash flow therefore should be added back to net income. However proceeds from sale of plant asset will be shown in investing activity.
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