Question

1.

Cash Flows from Operating Activities—Indirect Method

Staley Inc. reported the following data:

Net income	$232,900
Depreciation expense	58,500
Loss on disposal of equipment	26,700
Increase in accounts receivable	28,100
Increase in accounts payable	12,600

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.

2. Changes in Current Operating Assets and Liabilities—Indirect Method

Victor Corporation's comparative balance sheet for current assets and liabilities was as follows:

	Dec. 31, Year 2		Dec. 31, Year 1
Accounts receivable	$29,300		$25,500
Inventory	47,100		54,100
Accounts payable	11,200		13,800
Dividends payable	27,000		25,000

Adjust net income of $113,900 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.

Answer 1

1.

Cash Flow Statement of Staley Inc.

Cash flow from operating activities

particulars	Amount
Net income	$232900
+ depreciation expense	58500
+ loss on disposal of equipment	26700
- increase in accounts receivable	28100
+ increase in accounts payable	12600
Net cash flows from operating activities	302600

2.

Cash Flow Statement

Cash flow from operating activities

particulars	Amount
Net income	$113900
+ decrease in inventory	7000
- increase in accounts receivable	3800
- decrease in accounts payable	2600
Net cash flows from operating activities	114500

since net income is given dividend payable is not considered, if difference in profit is taken then only dividend payable will be cosidered.

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