Question

For the just completed year, Hanna Company had net income of $65,000. Balances in the company’s current asset and current liability accounts at the beginning and end of the year were as follows:

	December 31
	End of Year		Beginning of Year
Current assets:
Cash and cash equivalents	$	56,000	$	77,000
Accounts receivable	$	162,000	$	184,000
Inventory	$	436,000	$	361,000
Prepaid expenses	$	12,000	$	14,500
Current liabilities:
Accounts payable	$	362,000	$	388,000
Accrued liabilities	$	8,000	$	12,000
Income taxes payable	$	35,000	$	28,000

The Accumulated Depreciation account had total credits of $42,000 during the year. Hanna Company did not record any gains or losses during the year.

Required:

Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

For the just completed year, Hanna Company had net income of $65,000. Balances in the company’s current asset and current liability accounts at the beginning and end of the year were as follows:

	December 31
	End of Year		Beginning of Year
Current assets:
Cash and cash equivalents	$	56,000	$	77,000
Accounts receivable	$	162,000	$	184,000
Inventory	$	436,000	$	361,000
Prepaid expenses	$	12,000	$	14,500
Current liabilities:
Accounts payable	$	362,000	$	388,000
Accrued liabilities	$	8,000	$	12,000
Income taxes payable	$	35,000	$	28,000

The Accumulated Depreciation account had total credits of $42,000 during the year. Hanna Company did not record any gains or losses during the year.

Required:

Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

Hanna Company
Statement of Cash Flows—Indirect Method (partial)
		0
		$0

Answer 1

Hanna Company
Statement of Cash Flows—Indirect Method (partial)
Cash flow from Operating Activities
Net income	65,000
Add: Adjustments to reconcile net income to net cash provided by operating activities
Depreciation on fixed assets	42,000
Changes in current operating assets and liabilities:
Accounts receivable decrease	22,000
Inventory increase increase	-75,000
Prepaid expenses decrease	2,500
Accounts payable decrease	-26,000
Accrued liabilities decrease	-4,000
Income tax payable increase	7,000
Net cash provided by Operating Activities		33,500

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