Question

The following income statement and additional year-end information is provided. SONAD COMPANY Income Statement For Year Ended December 31 Sales $ 1,735,000 Cost of goods sold 850,150 Gross profit 884,850 Operating expenses Salaries expense $ 237,695 Depreciation expense 41,640 Rent expense 46,845 Amortization expenses—Patents 5,205 Utilities expense 19,085 350,470 534,380 Gain on sale of equipment 6,940 Net income $ 541,320 Accounts receivable $ 32,400 increase Accounts payable $ 10,650 decrease Inventory 24,100 increase Salaries payable 5,100 decrease Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.).

Answer 1

Statement of Cash Flow
Cash flow from operating activities:
Net income	$541,320
Adjustment to reconcile net income to operating cash flow
Add: Depreciation expense	$41,640
Add: Amortization expenses—Patents	$5,205
Add: Gain on sale of equipment	$(6,940)
Less: Increases in Accounts receivable	$(32,400)
Less: Increases in Inventory	$(24,100)
Less: Decrease in Salaries payable	$(5,100)
Less: Decrease in Accounts payable	$(10,650)
Net cash provided by Operating activities	$508,975