Question

Nt . Cash Flow Statement-indirect method (25%) Shown below is information from the financial statements of Taurus Corporation for 2018: End of Beginning of Year 201,000$221,000 249,000 $233,000 12,000 177,000 25,500 Year Accounts receivable Inventory Short-term prepayments Accounts payable (for merchandise) Accrued operating expenses payable Accrued income taxes payable Net sales $9,500 $170,000 $33,200 15,500 $12,600 $801,000 $465,000 Cost of goods sold perating expenses (including depreciation of $40,000) Income taxes expense $39,000 (a) On the basis of the above information, prepare a partial statement of cash flows, showing the computation of net cash flows from operating activities by the indirect method. (b) Explain why net income is different from the net cash provided by operations.

Answer 1

solution: statement of cash flow - Indirect Method (Partial For the year 2018 Operating activities: net income /(loss)** Adiustments to convert net income to a cash basis: Depreciation Decrease in account receivable-221000-201000 increase in Inventory-233000-249000 Increase in short term prepayments-9500-12000 increase in accounts payable-177000-170000 Decrease in accrued operating expense payable 25500-33200 Decrease in income tax payable-12600-15500 net cash provided by operating activities **workirn net sales Less cost of goods sold465000 Gross profit Less: operating expense 300000 net operating income Less income tax expense 39000 Net income 3,000 801000 40,000 20,000 16,000 2,500 7,000 7,700 336000 36000 3000 2,900 37,900 34,900 net income different from cash provided by operation as net income is calculated based merchantile basis i.e revenue and expense is recognized when it is earned or incurred even of cash not received whereas cash provided by operation is calculated by mere increase or decrease in cash because of operation h123 Sheed 124 Sheet1125Shee1126Sheet1127 Sheet1 128 Sheet1129Sheet1130 ENG UK 14/01/2019 21:14