A company reported net income of \$250,000. Depreciation and amortization totaled \$120,000. In total, Current assets excluding cash increased by \$25,000 and current liabilities increased by 16,000. The company also had a gain on the sale of equipment of \$4,000. Using the indirect method, what are cash flows from operating activities?

• A. \$357,000
• B. \$365,000
• C. \$375,000
• D. \$383,000

Answer: (A)

Verified step by step guidance

1. Start with the net income of \$250,000 as the base for calculating cash flows from operating activities using the indirect method.
2. Add back non-cash expenses such as depreciation and amortization, which total \$120,000, to the net income.
3. Adjust for changes in working capital: Subtract the increase in current assets (excluding cash) of \$25,000, as this represents a use of cash.
4. Add the increase in current liabilities of \$16,000, as this represents a source of cash.
5. Subtract the gain on the sale of equipment of \$4,000, as this gain is included in net income but does not affect cash from operating activities.