Question

Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $137,900. Depreciation recorded on store equipment for the year amounted to $22,800. 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	$53,640		$48,810
Accounts receivable (net)	38,460		36,070
Merchandise inventory	52,510		54,910
Prepaid expenses	5,900		4,640
Accounts payable (merchandise creditors)	50,260		46,170
Wages payable	27,460		30,160

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:
Increase in accounts receivable
Decrease in merchandise inventory
Increase in prepaid expenses
Increase in accounts payable
Decrease in wages payable
Net cash flow from operating activities		$

Answer 1

Cash Flows from Operating Activities section of the statement of cash flows

Statement of Cash Flows (partial)
Cash flows from operating activities:
Net income	$137,900
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	22,800
Changes in current operating assets and liabilities:
Increase in accounts receivable	- 2,390
Decrease in merchandise inventory	2,400
Increase in prepaid expenses	- 1,260
Increase in accounts payable	4,090
Decrease in wages payable	- 2,700
Net cash flow from operating activities		$160,840

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