Question

For the just completed year, Hanna Company had net income of $77,500. Balances in the company's current asset and current liability accounts at the beginning and end of the year were as follows: December 31 End of Beginning Year of Year Current assets: Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Current liabilities: Accounts payable Accrued liabilities Income taxes payable $ 55,000 $ 83,000 $168,000 $199,000 $442,000 $367,000 $ 12,000 $ 13,500 $352,000 $390,000 $ 8,500 $ 11,500 $ 32,000 $ 27,000 The Accumulated Depreciation account had total credits of $42,000 during the year. Hanna Company did not record any gains or losses during the year. Required: Using the indirect method, determine the net cash provided by operating activities for the year. (List any deduction in cash and cash outflows as negative amounts.)

Answer 1

Net income 77,500 Adjustment toconvert net income to cash basis Depreciation expense Decrease in account receivable 42,000 (198000-168000) ( 442000-367000) |( 13500-12000) |(390000-352000) |(11500-8500) |(32000-27000) 30,000 increase inventory (75,000) Decrease prepaid expense Decrease account payable Decrease accured liabilities Increase income tax payable cash used in operating activities Net cash flow from operating activities 1,500 (38,000) (3,000) 5,000 (37,500) 40,000 24 %24 %24 %24

Net income 77,500 Adjustment toconvert net income to cash basis Depreciation expense Decrease in account receivable 42,000 (198000-168000) ( 442000-367000) |( 13500-12000) |(390000-352000) |(11500-8500) |(32000-27000) 30,000 increase inventory (75,000) Decrease prepaid expense Decrease account payable Decrease accured liabilities Increase income tax payable cash used in operating activities Net cash flow from operating activities 1,500 (38,000) (3,000) 5,000 (37,500) 40,000 24 %24 %24 %24