Question

Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $116,500. Depreciation recorded on store equipment for the year amounted to $19,200. 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 $47,530 $43,730 Accounts receivable (net) 34,080 32,320 Merchandise inventory 46,530 49,200 Prepaid expenses 5,230 4,150 Accounts payable (merchandise creditors) 44,540 41,370 Wages payable 24,340 27,030 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 out flows, 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

Ans- Cash Flow Statement:-

Cash flow from operating activities:-
Net income		$116,500
Adjustment to reconcile net income to cash flow from operating activities:
Depreciation	$19,200
Changes in current opearting assets and liabilities:-
Increase in account receivable ($32,320-$34,080)	-$1,760
Decrease in merchandise inventory ($49,200-$46,530)	$2,670
Increase in prepaid expenses ($4,150-$5,230)	-$1,080
Increase in accounts payable ($41,370-$44,540)	$3,170
Decrease in wages payable ($27,030-$24,340)	-$2,690	$19,510
Net cash flow from operating activities		$136,010

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