Twin House Inc. reported net income of $753,000 for the current year-ended December 31. Twin House's financial statements reflected the following information:
Depreciation expense
$ 150,000
Gain on sale of trading securities
6,000
Goodwill impairment
75,000
Decrease in accounts receivable
48,000
Increase in inventory
33,000
Decrease in trading securities
50,000
Increase in available-for-sale securities
62,000
Increase in accounts payable
70,000
Decrease in taxes payable
15,000
Dividend paid
200,000
Dividend received
27,000
What should Twin House report as net cash provided by operating activities on the statement of cash flows, assuming that Twin House classifies the proceeds from the sale of the trading securities as an operating cash inflow?
a.
$892,000
b.
$1,030,000
c.
$1,119,000
d.
$1,092,000
The answer is D. 1,092,000.
In the explanation it says: Dividends Received is already added to net income so it doesn't require a further adjustment under the indirect method. How do you know that this is using the indirect method in the first place? Also, why does dividends received not require an adjustment under the indirect method, but does require one under direct?
BEC: Passed (8/31)
AUD: Passed (11/20)
FAR: Passed (2/26)
REG: 5/22
.