Question

Cash Flows from Operating Activities—Indirect Method

The net income reported on the income statement for the current year was $244,900. Depreciation recorded on equipment and a building amounted to $73,200 for the year. 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	$64,900		$68,790
Accounts receivable (net)	82,290		84,890
Inventories	162,250		146,250
Prepaid expenses	9,020		9,700
Accounts payable (merchandise creditors)	72,490		76,770
Salaries payable	10,450		9,560

a. 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 outflows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows (partial)
Cash flows from operating activities:
Net income	$
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation
Changes in current operating assets and liabilities:
Decrease in accounts receivable
Increase in inventories
Decrease in prepaid expenses
Decrease in accounts payable
Increase in salaries payable
Net cash flow from operating activities		$

Answer 1

Cash flow from Operating activities	Amount(in $)
Net Income	2,44,900
Add:Depreciation expenses	73,200
Add:Decrease in Accounts Receivable	2,600
Less:Increase in Inventory	(16,000)
Add:Decrease in Prepaid expenses	680
Less:Decrease in Accounts Payable	(4,280)
Add:Increase in Salaries payable	890
Cash flow from Operating activities	3,01,990