The net income reported on the income statement for the current year was $250,300. Depreciation recorded on equipment and a building amounted to $74,800 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
End of Year | Beginning of Year | |||
Cash | $66,580 | $69,240 | ||
Accounts receivable (net) | 84,420 | 85,440 | ||
Inventories | 166,450 | 147,200 | ||
Prepaid expenses | 9,250 | 9,760 | ||
Accounts payable (merchandise creditors) | 74,370 | 77,270 | ||
Salaries payable | 10,720 | 9,620 |
a. Prepare the "Cash Flows from Operating Activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.
Statement of Cash Flows (partial) | ||
Cash flows from operating activities: | ||
$ | ||
Adjustments to reconcile net income to net cash flow from operating activities: | ||
Changes in current operating assets and liabilities: | ||
Net cash flow from operating activities |
Cash flow from operating activities (indirect method)
Particulars | $ |
Cash flow from operating activities | |
Net income | 250,300 |
Add depreciation | 74,800 |
Add decrease in account receivables | 1,020 |
Less increase in inventory | (19,250) |
Add decrease in prepaid expenses | 510 |
Less decrease in account payable | (2,900) |
Add increase in salaries payable | 1,100 |
Cash flow from operating activities | 305,580 |
Cash inflow from operating activities under indirect method is $305,580.
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