Interest paid

Hello Sir,

In the following question why they did not deduct the interset paid to get the net cash flow from operations I thgink the answer should be C

Thanks,

Q

Zeta Co is preparing its statement of cash flows under indirect method. The
following extracts have been taken from the statement of financial position as at
31 December 2016:
20X5 20X6
Account receivable $50,000 $55,000
Inventory $16,000 $12,000
Account payable $22,000 $25,000
In addition, the following information is relevant:
(1) The profit before interest and tax is $70,000
(2) The cost and net book value of the non-current assets are $100,000 and
$80,000 respectively. The business charges straight line depreciation at 20% per
annum.
(3) The business incurred loss on foreign operations of $5,000.
(4) The business paid interest of $4,000 on outstanding debt.
Calculate the amount of cash generated from operations.
A) $90,000
B) $92,000
C) $93,000
D) $97,000

Answer

D

Profit before interest and tax $70,000
Depreciation ($100,000 x 20%) $20,000
Increase in account receivable ($5,000)
Foreign exchange loss $5,000
Decrease in inventory $4,000
Increase in payable $3,000
Cash generated from operations $97,000