Question

Exercise 12-4 Indirect: Cash flows from operating activities LO P2 The following income statement and information...

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

Homework Answers

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

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