Question

Determining Net Cash Flow from Operating Activities Presented below are selected statement of financial position information and the statement of earnings information for Burch Company. Selected Statement of Financial Position Information Dec. 31, 2018 Dec. 31, 2017 Cash $17,500 $20,000 10,500 8,000 18,000 21,000 Accounts receivable Inventory Accounts payable Income taxes payable 10,000 15,000 1,000 2,500 Burch Company Statement of Earnings For the year ended December 31, 2018 Sales Cost of goods sold Depreciation expense $250,000 (160,000) (15,000) (35,000) (12,000) Other expenses Income tax expense Net income $ 28,000 Required: Compute the net cash flows from operating activities using the indirect method.

Answer 1

Cash Flows from Operating Activities:
Net income	28000
Adjustments to reconcile net income to
Net cash provided by operating activities
Depreciation expense	15000
Increase in Accounts Receivable	-2500	=8000-10500
Decrease in inventory	3000	=21000-18000
Increase in accounts payable	5000	=15000-10000
Decrease in income taxes payable	-1500	=1000-2500
Net cash flows from operating activities	47000