Question

Problem 17-05A

Zumbrunn Company’s income statement contained the following condensed information.

ZUMBRUNN COMPANY Income Statement For the Year Ended December 31, 2020
Service revenue				$972,000
Operating expenses, excluding depreciation		$624,500
Depreciation expense		54,600
Loss on disposal of plant assets		24,100		703,200
Income before income taxes				268,800
Income tax expense				40,100
Net income				$228,700

Zumbrunn’s balance sheets contained the comparative data at December 31, shown below.

		2020		2019
Accounts receivable		$74,400		$61,000
Accounts payable		40,300		27,000
Income taxes payable		12,900		6,400

Accounts payable pertain to operating expenses.

Prepare the operating activities section of the statement of cash flows using the indirect method.

Answer 1

Solution:

Particulars	Details
Cash Flow from Operating Activities:
Net Income	$2,28,700
Adjustments to reconcile net income to cash flow from operating activities:
Depreciation expense	$54,600
Loss on disposal of plant assets	$24,100
Accounts Receivable Increase ($61000-74400)	-$13,400
Accounts Payable Increase ($40300-27000)	$13,300
Income Tax Payable increase ($12900-6400)	$6,500
Net Cash provided by Operating Activities	$3,13,800