Funds of operating activities: Funds of operating activities refer to funds generated from the sales of goods and services that the organization deals with. It also refers to the funds expended for business operation like purchasing materials, transportation cost, salaries of the employees, and payment of various taxes. Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities. Deduct increase in current assets. Deduct decrease in current liabilities. Add decrease in current assets. Add the increase in current liability. Add depreciation expense and amortization expense. Add loss on sale of plant assets. Less gain on sale of plant assets. To Compute: Net cash provided by operating activities using indirect method.

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Chapter 12, Problem 12.5BE

To determine

Funds of operating activities:

Funds of operating activities refer to funds generated from the sales of goods and services that the organization deals with. It also refers to the funds expended for business operation like purchasing materials, transportation cost, salaries of the employees, and payment of various taxes.

Indirect method: Under this method, the following amounts are to be adjusted from the Net Income to calculate the net cash provided from operating activities.

Deduct increase in current assets.

Deduct decrease in current liabilities.

Add decrease in current assets.

Add the increase in current liability.

Add depreciation expense and amortization expense.

Add loss on sale of plant assets.

Less gain on sale of plant assets.

To Compute: Net cash provided by operating activities using indirect method.

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