Question

The income statement disclosed the following items for the current year:

Depreciation expense	$36,000
Gain on disposal of equipment	21,000
Net income	317,500

Balances of the current assets and current liabilities accounts changed between December 31, last year, and December 31, this year, as follows:

Increase in accounts receivable	$5,600
Decrease in inventory	3,200
Decrease in prepaid insurance	1,200
Decrease in accounts payable	3,800
Increase in income taxes payable	1,200
Increase in dividends payable	850

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 out flows, cash payments, decreases in cash, or any negative adjustments.

Operating Activities Section
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		$

Answer 1

Solution:

Statement of Cash Flow

Cash flows from Operating activities:
Net income	$317,500
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$36,000
Gain on disposal of equipment	$(21,000)
Changes in current operating assets and liabilities:
Increase in accounts receivable	$(5,600)
Decrease in inventory	$3,200
Decrease in prepaid insurance	$1,200
Decrease in accounts payable	$(3,800)
Increase in income taxes payable	$1,200
Net cash flow from operating activities		$328,700