The following information is given for Tripp Company, which uses the indirect method.
Net income $20,000
Depreciation expense 3,000
Increase in accounts receivable 2,000
Payment of dividends 2,000
Proceeds from sale of equipment 6,000
Increase in accounts payable 4,000
Decrease in inventory 3,000
From the information provided, answer the following questions:
1. The cash flow from operating activities is ________.
2. The cash flow from investing activities is ________.
3. The cash flow from financing activities is ________.
Solution
1.
The cash flow from operating activities is = $28000.
Working Note:
Net Income $20000
Depreciation expense $3000

Increase in accounts receivable ($2000)
Increase in accounts payable $4000
Decrease in inventory $3000
Net Cash Flow from Operating Activities = 20000 + 3000 – 2000 + 4000 + 3000
Net Cash Flow from Operating Activities = $28000
2.
The cash flow from investing activities = $6000.
Working Note:
Proceeds from sale of equipment $6000
Net cash flow from investing activities = $6000
3.
The cash flow from financing activities = - $2000 or ($2000)
Working Note:
Payment of dividends ($2000)
Net Cash flow from financing activities = - $2000 or ($2000)