Determining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $357,500 on its statement of cash flows for the year ended December 31, 2014. The following information was reported in the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method:

Decrease in income taxes payable $7,700
Decrease in inventories 19,140
Depreciation 29,480
Gain on sale of investments 13,200
Increase in accounts payable 5,280
Increase in prepaid expenses 2,970
Increase in accounts receivable 14,300

Determine the net income reported by Curwen Inc. for the year ended December 31, 2014.

Net income = $341,770

Explanation:

We know,

Cash flow provided by operating activities = Net income + Changes in working capital + Non cash items.

Cash flow provided by operating activities = Net income +(-Decrease in income taxes payable + Decrease in inventories + Increase in accounts payable - Increase in prepaid expenses - Increase in accounts receivable) + Depreciation - Gain on sale of investments

$357,500 = Net income + (- $7,700 + $19,140 + $5,280 - $2,970 - $14,300) + $29,480 - $13,200

$357,500 = Net income - $7,700 + $19,140 + $5,280 - $2,970 - $14,300 + $29,480 - $13,200

$357,500 = Net income + $15,730

$357,500 - $15,730 = Net income

Net income = $341,770

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