Question

U V W X Name: Chapter 11 - Part 1 (Practice) к 1 M м NE Principles of Financial Accounting (ACC 221) Winter 2020 1. Based on the following information for XYZ, Inc., prepare the operating section of the statement of cash flows for 2021: $ 28,500,000 995,500 29,495,500 Current assets Accounts receivable Inventory Prepaid rent Increase of: Decrease of Increase of 1,450,000 2,275,000 1,200,000 9 Revenues Gain/ (loss) on sales of assets Total revenues Expenses: Cost of goods sold Operating expenses Depreciation expense Total expenses Net Income 19,500,000 7,500,000 1,750,000 28,750,000 745,500 Current liabilities Accounts payable Interest payable Increase of Increase of Decrease of 985,000 150,500 272,500 $ Income tax payable XYZ, Inc. Statement of Cash Flows Begin with net income: 19 20 21 1. Add back depreciation: 2 Remove gains & losses: 3. Adjust for changes: Net cash from operations: $ . 2020 $ 20 2 Based on the following information for ABC, Inc., prepare the operating section of the statement of cash flows for 2021: 2021 31 Revenues 2,705,996 Current assets Loss on sale of equipment (13,250) Accounts receivable 87,600 Total revenues 2,692,745 Inventory 151,000 Expenses: Prepaid rent 24,507 Cost of goods sold 1,575,000 Operating expenses 854,000 Current liabilities Depreciation expense 31,075 Accounts payable 54,065 Total expenses 2,460, 075 Accrued liabilities 20,995 39 Net Income Income tax payable 18,101 85,100 162,500 15,000 58,000 18,075 21,000 232,670 $ ABC, Inc. Statement of Cash Flows Begin with net income: 44 45 1. Add back depreciation: 2 Remove gains & losses: 3. Adjust for changes: ES Soom Net cash from operations: S

Answer 1

Answer :-

1)

XYZ,Inc Statement of Cash Flows
Cash flows from operating activities
Net income	$ 745,500
Adjustments for:
Add:- Depreciation expense	$ 1,750,000
Less :- Gain on sales of assets	($ 995,500)
Adjust for Changes :-
Increase in Account receivable	($ 1,450,000)
Decrease in Inventory	$ 2,275,000
Increase in Prepaid rent	($ 1,200,000)
Increase in Account Payable	$ 985,000
Increase in Interest Payable	$ 150,500
Decrease in Income tax payable	( $ 272,500)
Net Cash from Operations	$ 1,988,000

To Find out the Operating section of the Cash flow statement, First we have to began with the Net income.

If any Depreciation expense is given in the question we should add that expenses in the Net Income .

If any Loss / Gain on sales of assets is given then we will Add the loss on sales of assets and Less the Gain on sales of assets . In above answer we have added the Gain on sales of asset.

And in case of Change in assets and liabilities :-

Increase in Current Assets - We should Subtract or deduct it from Net Income .

Decrease in Current Assets - We should Add it to Net income

Increase in current liabilities - we should Add it to Net income

Decrease in Current liabilities - we should deduct or subtract if from Net income.