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Determining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $196,600 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:

Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow from operating activities of $196,600 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 Decrease in inventories Depreciation Gain on sale of investments Increase in accounts payable Increase in prepaid expenses Increase in accounts receivable a. Determine the net income reported by Curwen Inc. for the year ended December 31 $3,700 9,200 14,200 6,400 2,600 1,600 7,000 b. Curwens net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference? a. Because depreciation expense which has no effect on cash flows from operating activities. b. Changes in current operating assets and liabilities that are added or deducted. c. Changes in fixed assets and liabilities that are added or deducted. d. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.

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a. | Net Income $189,300 Working Notes: Curwen Inc Statement of Cash flows (Partial For the Year Ended December 31 Cash flows from Operating Activities: Net Income Adiustments to reconcile net income to net cash provided by operations Depreciation expenses Gain on Sale of investments Increase in accounts receivables Decreases in Inventory Increases in Prepaid Expenses Increases in Accounts Payable Decrease in Income Taxes payable Net Cash provided by operating activities S 189,300 S 14,200 S (6,400) S (7,000) S9,200 S (1,600) 2,600 s(3,700 s 730 S 196,600 b. Answer b. Changes in Current operating assets and liabilities that are added or deducted Notes: While caluclating net income only revenue income and revenue expenses are taken in consideration and cash flow from opeartting activities section we also include the changes in current operating assets and operating liabilities

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