Question

Exercise 12-4 Indirect: Cash flows from operating activities LO P2

The following income statement and information about changes in noncash current assets and current liabilities are reported.

SONAD COMPANY Income Statement For Year Ended December 31, 2017
Sales				$	1,828,000
Cost of goods sold					991,000
Gross profit					837,000
Operating expenses
Salaries expense	$	245,535
Depreciation expense		44,200
Rent expense		49,600
Amortization expenses–Patents		4,200
Utilities expense		18,125			361,660
					475,340
Gain on sale of equipment					6,200
Net income				$	481,540

Changes in current asset and current liability accounts for the year that relate to operations follow.

  

Accounts receivable	$	30,500		increase		Accounts payable	$	12,500		decrease
Inventory		25,000		increase		Salaries payable		3,500		decrease

Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Statement of Cash Flows (partial)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expense
Increase in accounts payable
Decrease in salaries payable
Changes in current operating assets and liabilities
Loss on sale of equipment
Increase in accounts receivable
Decrease in salaries payable
	$0

Answer 1

SONAD COMPANY
Statement of Cash Flows (partial)
Cash flows from operating activities
Net income		481540
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expense	44200
Gain on sale of equipment	-6200
Amortization expenses–Patents	4200
Changes in current operating assets and liabilities
Decrease in accounts payable	-12500
Decrease in salaries payable	-3500
Increase in accounts receivable	-30500
Increase in Inventory	-25000
Net changes		-29300
Cash flows from operating activities		452240