Pearl Corporation’s accumulated depreciation—furniture account increased by $8,400, while $3,080 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $4,480 from the sale of land.
Reconcile a net income of $120,400 to net cash flow from operating activities. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
| Amount Descriptions | |
|---|---|
| Amortization of patents | |
| Decrease in accounts receivable | |
| Depreciation | |
| Gain from sale of land | |
| Increase in accounts receivable | |
| Loss from sale of land | |
| Net cash flow from operating activities |
Furniture depreciation is noncash.
Amortized patents are noncash.
Because these expenses are noncash, they are added back to net income.
Assuming Pearl Corporation is not a real estate company, you disregard the sale of land because that is an investing activity, but you still have to Add the 4480 loss from the sale of land to isolate the operating activities.
| NeT income | 120400 |
| Add/less | |
| Amount Descriptions | |
| Amortization of patents | 3080 |
| Depreciation | 4800 |
| Loss from sale of land | 4480 |
| Net cash flow from operating activities | 132760 |
