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In the course of preparing a company’s Statement of Cash Flows, the following figures are to be included in the calculation of net cash from operating activities:
$
Depreciation charges 980,000
Profit on sale of non-current assets 40,000
Increase in inventories 130,000
Decrease in receivables 100,000
Increase in payables 80,000What will be the net effect of these items in the Statement of Cash Flows?
addition to operating profit of $1,070,000
addition to operating profit of $990,000
subtraction from operating profit of $890,000
addition to operating profit of $890,000
I get answer – addition of $990,000. However, answer given is addition of $890,000Depreciation +980,000
Profit on disposal – 40,000
Increase in inventories -130,000
Decrease in receivables +100,000
Increase in payables +80,000Correct answer is an addition to operating profit of $990,000.
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