Question

Cash Flows from (Used for) Operating Activities

The net income reported on the income statement for the current year was $73,600. Depreciation recorded on store equipment for the year amounted to $27,400. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year		Beginning of Year
Cash	$23,500		$18,700
Accounts receivable (net)	56,000		48,000
Merchandise inventory	35,500		40,000
Prepaid expenses	4,750		7,000
Accounts payable (merchandise creditors)	21,800		16,800
Wages payable	4,900		5,800

a. Prepare the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows (partial)
Cash flows from (used for) operating activities:
	$
Adjustments to reconcile net income to net cash flows from (used for) operating activities:
Changes in current operating assets and liabilities:
Net cash flow from operating activities		$

b. Cash flows from operating activities differ from net income because it does not use the_______ of accounting.

For example revenues are recorded on the income statement when ___________

Answer 1

	Cash flow from operating activities
	net income					73,600
	Adjustments to reconcile net income to net cash
	flows from (used for) operating activities
	Depreciation expense					27,400
	Changes in current assets and liabilities:
	increase in accounts receivable					-8000
	decrease In merchandise inventory					4500
	Decrease in prepaid expenses					2250
	increase in accounts payable					5000
	Decrease In wages payable					-900
	Net cash flow from operating activities					103,850
	cash from operating activities differ from net income because
	it does not use the cash basis of accouting
	for example revenues are recorded on the income statement
	when accrued