Question

7. Prepare the operating section of the statement of cash flows under the Indirect method using the income statement below. During the year, the accounts payable also increased by $1,200 and accounts receivable decreased by $2,200 $182,100 90.400 $ 91,700 ABC Corporation Income Statement For the Year Ended December 31, 2015 Sales revenue Cost of merchandise sold Gross profit Operating expenses: Salaries expense $41,300 Advertising expense 1.500 Depreciation expense Amortization expense Total operating expenses Income from operations Other income and expenses Rent revenue Gain on sale of equipment Net income 6.250 2.240 $51.299 $ 40, 410 $15.300 - 2.200 $17.500 S 57.910 • Use the income statement below to prepare the statement of cash flows using the indirect method. During the year, the company also had a $750 decrease in accounts payable, a $200 increase in supplies, and a $1,000 decrease in accounts receivable. The company issued $4,000,000 of 10% bonds at face value and paid $14,000 in dividends to shareholders. ABC Corporation received $10,000 in cash for the investments sold. The cash balance at the beginning of the year was $460,900. ABC Corporation Income Statement For the Year Ended December 31, 2015 Sales revenue $122,300 Cost of merchandise sold 25,700 Gross profit $ 96,600 Operating expenses: Salaries expense $35,000 Insurance expense 4,800 Depreciation expense 7,700 Amortization expense 1,200 Total operating expenses 48,700 Income from operations $ 47,900 Other income and expenses:

Answer 1

Solution

Part 1:

ABC Corporation

ABC Corporation
Statement of Cash Flows (Partial) (Indirect Method)
For the Year Ended December 31, 2015
Cash flows from operating activities:
Net Income		$57,910
Adjustments to reconcile net income to net cash flow from operations:
Depreciation	$6,250
Amortization expense	$2,240
Gain on sale of equipment	($2,200)
Decrease in accounts receivable	$2,200
Increase in accounts payable	$1,200	$9,690
Cash flow from operating activities		$67,600