Question

Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $286,100. Depreciation recorded on equipment and a building amounted to $85,500 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 $78,680 $81,830 99,770 100,980 196,700 173,970 Cash Accounts receivable (net) Inventories Prepaid expenses Accounts payable (merchandise creditors) Salaries payable 10,940 11,540 87,890 91,320 12,670 11,370 a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities b. If the direct method had been used, would the net cash flow from operating activities have been the same?

Answer 1

Question:1

Requirement:A

Statement of Cash Flows [Partial]
Cash flows from operating activities:
Net Income	$        286,100
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation expense	$           85,500
Changes in current operating assets and liabilities
Decrease in Accounts receivables [100980-99770]	$             1,210
Increase in Inventories [173970-196700]	$        (22,730)
Decrease in prepaid expenses [11540-10940]	$                 600
Decrease in Accounts payable [87890-91320]	$           (3,340)
Increase in salaries payable [12670-11370]	$             1,300
Net cash provided from operating activities		$     348,640

Requirement:B

The Answer is SAME

Explanation:

1) Operating Activity can be answered through two method, one is direct method and other indirect method. Under both the method, Net cash provided from operating activities will be same irrespective of procedure followed.