Question

Exercise 11-11A Calculate operating activities—indirect method (LO11-3)

Portions of the financial statements for Peach Computer are provided below.

PEACH COMPUTER Income Statement For the year ended December 31, 2021
Net sales				$	1,975,000
Expenses:
Cost of goods sold	$	1,120,000
Operating expenses		630,000
Depreciation expense		57,000
Income tax expense		47,000
Total expenses					1,854,000
Net income				$	121,000

PEACH COMPUTER Selected Balance Sheet Data December 31
	2021			2020			Increase (I) or Decrease (D)
Cash	$	109,000		$	88,500		$	20,500		(I)
Accounts receivable		45,700			52,500			6,800		(D)
Inventory		82,000			58,500			23,500		(I)
Prepaid rent		3,700			6,400			2,700		(D)
Accounts payable		52,000			40,500			11,500		(I)
Income tax payable		5,700			13,500			7,800		(D)

Required:
Prepare the operating activities section of the statement of cash flows for Peach Computer using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Answer-

PEACH COMPUTER
STATEMENT OF CASH FLOWS PARTIAL (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31, 2021
Particulars		Amount
		$
Cash flow from operating activities
Net Income		121000
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expense		57000
Change in operating assets & liabilities
Decrease in accounts receivable		6800
Incresae in inventories		-23500
Decrease in accounts payable		11500
Decrease in prepaid rent		2700
Decrease in income tax payable		-7800
Net cash flow from operating activities		167700