Question

Swasey Company provided the following partial comparative balance sheets and the income statement for 20X2.

Swasey Company

Partial Comparative Balance Sheets

At December 31, 20X1 and 20X2

1		20X1	20X2
2	Current Assets
3	Accounts receivable	745,000.00	677,000.00
4	Inventories	295,000.00	315,000.00
5	Current liabilities
6	Wages payable	705,000.00	680,000.00

Swasey Company

Income Statement

For the Year Ended December 31, 20X2

1	Revenues	3,410,000.00
2	Gain on sale of equipment	100,000.00
3	Cost of goods sold	(1,910,000.00)
4	Depreciation expense	(260,000.00)
5	Interest expense	(10,000.00)
6	Net income	$1,330,000.00

Required: Compute operating cash flows using the indirect method.

Refer to the list below for the exact wording of an amount description within your Statement of Cash Flows.

Amount Descriptions
Add cost of goods sold
Add interest expense
Decrease in accounts receivable
Decrease in inventories
Decrease in wages payable
Depreciation expense
Gain on sale of equipment
Increase in accounts receivable
Increase in inventories
Increase in wages payable
Less cost of goods sold
Loss on sale of equipment
Net cash from financing activities
Net cash from investing activities
Net cash from operating activities
Net income
Net loss

Compute operating cash flows using the indirect method. (Note: Use a minus sign to indicate any decreases in cash or cash outflows. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.)

Answer 1

Solution

Swasey Company
Statement of Cash Flows
For the Year Ended December 31, 20X2
Cash flows from operating activities:
Net income		$1,330,000.00
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	$      260,000.00
Gain on sale of Equipment	$   (100,000.00)
Decease in accounts receivables	$     68,000.00
Increase in Inventories	$    (20,000.00)
Decrease in wages payable	$    (25,000.00)
		$   183,000.00
Net cash from Operating Activities		$1,513,000.00

.General notes for cash flow
Cash is increased when Current liability increase or Current asset Decrease.
Cash is Decreased when Current liability Decrease or Current asset Increase.
Depreciation or loss on sale of any asset is a non cash expense hence it will be added to net income to get operating cash
Profit on sale of asset or investment is a non cash profit and hence will be deducted from operating income.