Question

The net income reported on the income statement of Hunter Inc. for the current year was $150,000. Depreciation recorded on equipment and building amounted to $45,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

Account	End of Year	Beginning of Year
Cash	42,875	36,250
Trade Receivables (net)	147,500	137,500
Inventories	109,375	93,750
Prepaid Expenses	9,250	11,875
Accounts Payable	57,000	40,000
Salaries Payable	7,625	10,625
Dividends Payable	4,250	3,125
Interest Received on Investments	1,800	1,500

Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Answer 1

Answer:

Cash Flow statement (Partial)
Cash Flow from Operating Activities
Profit before tax		$ 150,000
Adjustments to be made:
Depreciation	$ 45,000
Interest received	$ (1,800)
Increase in Trade receivable	$(10,000)
Increase in Inventory	$(15,625)
Decrease in Prepaid Insurance	$    2,625
Decrease in Salaries payable	$ (3,000)
Increase in Accounts payable	$ 17,000
		$   34,200
Cash Flow from Operating Activities		$184,200

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