Question

Operating Activities Section-Indirect Method The following account balances for the noncash current assets and current liabilities of Suffolk Company are available: Accounts receivable Inventory Prepaid rent Totals Accounts payable Income taxes payable Interest payable Totals December 31 2017 2016 $43,230 $35,340 30,020 39,890 17,110 14,830 $90,360 $90,060 $26,200 $19,380 5,880 9,590 14,680 11,630 $46,760 $40,600 Net income for 2017 is $39,580. Depreciation expense is $19,100. Assume that all sales and all purchases are on account. Required: 1. Prepare the Operating Activities section of the statement of cash flows using the indirect method. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

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Answer 1

Answer-1)-

SUFFOLK COMPANY
STATEMENT OF CASH FLOWS PARTIAL (USING INDIRECT METHOD)
FOR THE YEAR ENDED DECEMBER 31,2017
Particulars		Amount
		$
Cash flow from operating activities
Net Income		39580
Adjustments to reconcile net income to net cash provided by operating activities
Adjustment for non cash effects
Depreciation expenses		19100
Change in operating assets & liabilities
Increase in accounts receivable		-7890
Decrease in inventory		9870
Increase in prepaid rent		-2280
Increase in accounts payable		6820
Decrease in income taxes payable		-3710
Incresae in interest payable		3050
Net cash flow from operating activities		64540

2)- Net cash flow from operating activities is $64540 and the primary reason why it is higher than net income is decrease in inventory. Other reasons for the higher amount of net cash inflow from operating activities are increase in accounts payable and increase in interest payable.