Question

Using the following income statement and additional year-end information.

SONAD COMPANY Income Statement For Year Ended December 31
Sales				$	1,516,000
Cost of goods sold					742,840
Gross profit					773,160
Operating expenses
Salaries expense	$	207,692
Depreciation expense		36,384
Rent expense		40,932
Amortization expenses—Patents		4,548
Utilities expense		16,676			306,232
					466,928
Gain on sale of equipment					6,064
Net income				$	472,992

Accounts receivable	$	31,050		increase		Accounts payable	$	8,625		decrease
Inventory		24,225		increase		Salaries payable		4,700		decrease

Prepare the operating activities section of the statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

SONAD COMPANY
Statement of Cash Flow (Partial)
For the Year Ended December 31
Cash flows from operating activities:
Net Income		472,992
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	36,384
Amortization expenses—Patents	4,548
Gain on sale of equipment	(6,064)
Increase in accounts receivable	(31,050)
Increase in inventory	(24,225)
Decrease in accounts payable	(8,625)
Decrease in salaries payable	(4,700)	(33,732)
Net Cash flows from Operating Activities		439,260