Question

he net income reported on the income statement for the current year was $346,400. Depreciation recorded...

he net income reported on the income statement for the current year was $346,400. Depreciation recorded on equipment and a building amounted to $99,330 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 $90,570 $96,530
Accounts receivable (net) 111,490 119,020
Inventories 222,910 208,840
Prepaid expenses 13,500 14,540
Accounts payable (merchandise creditors) 96,260 103,590
Salaries payable 15,150 12,980

Required:

A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
B. If the direct method had been used, would the net cash flow from operating activities have been the same?

Homework Answers

Answer #1

A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

Cash flow from operating activities
Net income 346400
Adjustment to reconcile net income to net cash flow from operating activities
Depreciation expense 99330
Decrease account receivable 7530
Increase inventories -14070
Decrease prepaid expense 1040
Decrease account payable -7330
Increase salaries payable 2170
88670
Net cash flow from operating activities 435070

2) Yes, If the direct method had been used, the net cash flow from operating activities would have been the same.

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