Question

The income statement of Sandhill Company is shown below. SANDHILL COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 Sales revenue $6,860,000 Cost of goods sold Beginning inventory $1,810,000 Purchases 4,790,000 Goods available for sale 6,600,000 Ending inventory 1,570,000 Cost of goods sold 5,030,000 Gross profit 1,830,000 Operating expenses Selling expenses 420,000 Administrative expenses 640,000 1,060,000 Net income $770,000 Additional information: 1. Accounts receivable decreased $280,000 during the year. 2. Prepaid expenses increased $160,000 during the year. 3. Accounts payable to suppliers of merchandise decreased $250,000 during the year. 4. Accrued expenses payable decreased $110,000 during the year. 5. Administrative expenses include depreciation expense of $70,000. Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, for Sandhill Company, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Answer 1

Statement of cash flows (PARTIAL)

Particulars	$	$
Cash flow from Operating Activities
Net income	$770,000
Add: Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	70,000
Changes in current operating assets and liabilities:
Accounts receivable decrease	280,000
Inventory decrease	240,000
Prepaid insurance increase	- 160,000
Accounts payable decrease	- 250,000
Accrued expenses payable decrease	- 110,000
Net cash provided by Operating Activities		$840,000