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Bernie's Ltd. Income Statement For the Year ended December 31, 20X5 Income: Sales 682,000 Dividends 22,000 Interest 29,000 Gain on sale of PPE (Property Plant

Bernie's Ltd.
Income Statement
For the Year ended December 31, 20X5
Income:
Sales 682,000
Dividends 22,000
Interest 29,000
Gain on sale of PPE (Property Plant & Equipment) 19,000
Total income 752,000
Expenses:
Cost of goods sold 360,000
Depreciation 43,000
Wages 134,000
Interest 38,000
Other expenses 41,000
Total expenses 616,000
Net income before income tax expense 136,000
Income tax expense 36,000
Net income after income tax expense 100,000

Additional information:

PPE purchases during 20X5 were $735,000

Issuance of mortgage payable during 20X5 $226,000

The company follows ASPE.

All prepaid expenses at the beginning of the year expired during 20X5.

$5,000 was accrued for operating expenses at year end.

Bernie's Ltd.
Balance sheet
As at December 31, 20X5 20X4
Assets
Cash 57,000 101,000
Accounts receivable 224,000 192,000
Inventory 323,000 330,000
Interest receivable 8,000 3,000
Prepaids 18,000 17,000
Long term receivable from Dennis's Ltd. 26,000 -
Property, Plant and Equipment (PPE), net 1,087,000 525,000
Total 1,743,000 1,168,000
Liabilities
Accounts payable 220,000 137,000
Accrued liabilities 5,000 7,000
Wages payable 6,000 12,000
Mortgage payable 384,000 185,000
Shareholder's Equity
Common shares 861,000 619,000
Retained earnings 267,000 208,000
Total 1,743,000 1,168,000

How much is the net adjustment to net income under the operating activities section for inventory as it appears on the cash flow statement when using the indirect method?

Multiple Choice

$6,000

($7,000)

The adjustment for inventory does not fall under the operating activities section.

$7,000

None of the other alternatives are correct

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