Question

The financial statements of Simon Co. include the following items (amounts in thousands): Income Statement For...

The financial statements of Simon Co. include the following items (amounts in thousands):

Income Statement For the Year Ended December 31, 2017
Net income $ 473
Depreciation and amortization expense 336
At December 31
Balance Sheets 2017 2016
Accounts receivable $ 143 $ 186
Inventory 163 135
Accounts payable 33 136
Income taxes payable 73 31

Required:

a. Calculate the net cash flow provided (used) by operations for Simon Co. for the year ended December 31, 2017. (Enter your answer in thousands. (i.e., 20,000 should be entered as 20))

b. Net income and cash flows provided by operations may differ because of the timing of cash receipts and payments versus the timing of recognition on the income statement. True or false?
Business   Accounting   
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Answer #1

SOLUTION

A. Net Cash flow Provided by operating activities-

Particulars Amount ($) Amount ($)
Cash flow Provided by operating activities-
Net income 473
Add: Depreciation and amortization 336
Add: Decrease in accounts receivable (186-143) 43
Less: Increase in inventory (163-135) (28)
Less:Decrease in accounts payable (136-33) (103)
Add: Increase in income tax payable (73-31) 42 290
Net Cash flow Provided by operating activities 763

B. Given statement is False. Net cash flow is different from net income, because, it has the adjustment of non cash transaction. The adjustments made in calculating net income, are non-cash transactions.

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