Question

The net income reported on the income statement for the current year was $250,300. Depreciation recorded...

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

Homework Answers

Answer #1

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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