Question

16.3

#5

The net income reported on the income statement for the current year was $346,400. Depreciation recorded on equipment and a building amounted to $99,330 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year	Beginning of Year
Cash	$90,570	$96,530
Accounts receivable (net)	111,490	119,020
Inventories	222,910	208,840
Prepaid expenses	13,500	14,540
Accounts payable (merchandise creditors)	96,260	103,590
Salaries payable	15,150	12,980

Amount Descriptions
Amortization of intangible assets
Decrease in accounts payable
Decrease in accounts receivable
Decrease in inventories
Decrease in prepaid expenses
Decrease in salaries payable
Depreciation
Increase in accounts payable
Increase in accounts receivable
Increase in inventories
Increase in prepaid expenses
Increase in salaries payable
Net cash flow from operating activities
Net cash flow used for operating activities
Net income
Net loss

Required:

A.	Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
B.	If the direct method had been used, would the net cash flow from operating activities have been the same?

Answer 1

1)

Cash flow from operating activities
Net income	346400
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation expense	99330
Decrease in accounts receivable	7530
Increase inventories	-14070
Decrease in prepaid expenses	1040
Decrease in accounts payable	-7330
Increase in salaries payable	2170
Net cash flow from operating activities	435070

b) Yes, Net cash flow from operating activities would be same under direct method