Question

Curwen Inc. reported net cash flow from operating activities of $201,300 on its statement of cash flows for the year ended December 31. The following information was reported in the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method: Decrease in income taxes payable $4,600 Decrease in inventories 11,500 Depreciation 17,700 Gain on sale of investments 8,000 Increase in accounts payable 3,200 Increase in prepaid expenses 1,900 Increase in accounts receivable 8,700 a. Determine the net income reported by Curwen Inc. for the year ended December 31. $ b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference? Because depreciation expense which has no effect on cash flows from operating activities. Changes in current operating assets and liabilities that are added or deducted. Changes in fixed assets and liabilities that are added or deducted. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.

Answer 1

Part a answer----$ 201,300

Working

Decrease in income taxes payable	$      (4,600.00)
Decrease in Inventory	$      11,500.00
Depreciation expense	$      17,700.00
Gain on sale of Investment	$      (8,000.00)
Increase in accounts payable	$         3,200.00
Increase in prepaid expenses	$      (1,900.00)
Increase in accounts receivables	$      (8,700.00)
Subtotal	$         9,200.00
Net income (Balancing figure)	$   1,92,100.00
Operating cash balance	$   2,01,300.00

Part b

Correct answer---- Because depreciation expense which has no effect on cash flows from operating activities. , Changes in current operating assets and liabilities that are added or deducted., Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.

Three options provided above are reason for difference in operating cash and net income.