Question

For the just completed year, Hanna Company had net income of $53,000. Balances in the company’s current asset and current liability accounts at the beginning and end of the year were as follows:

	December 31
	End of Year		Beginning of Year
Current assets:
Cash	$	62,000	$	78,000
Accounts receivable	$	162,000	$	196,000
Inventory	$	433,000	$	352,000
Prepaid expenses	$	11,500	$	14,000
Current liabilities:
Accounts payable	$	366,000	$	388,000
Accrued liabilities	$	9,000	$	11,500
Income taxes payable	$	33,000	$	25,000

  

The Accumulated Depreciation account had total credits of $44,000 during the year. Hanna Company did not record any gains or losses during the year.

Required:

Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

Answer 1

Hanna Company
Statement of Cash Flows—Indirect Method (partial)
Net income		53000
Adjustments to convert net income to a cash basis:
Depreciation expense	44000
Decrease in Accounts receivable	34000
Increase in Inventory	-81000
Decrease in Prepaid expenses	2500
Decrease in Accounts payable	-22000
Decrease in Accrued liabilities	-2500
Increase in Income taxes payable	8000
		-17000
Net cash provided by operating activities		36000