Question

Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $213,300. Depreciation recorded on equipment and a building amounted to $63,800 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 $59,510 $61,890 Accounts receivable (net) 75,460 76,370 Inventories 148,780 131,580 Prepaid expenses 8,270 8,730 Accounts payable (merchandise creditors) 66,470 69,070 Salaries payable 9,580 8,600 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) 128.100 X 21.100 X Cash flows from operating activities: Net Income ✓ Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Decrease in accounts receivable Increase in inventories Increase in accounts receivable X Increase in accounts payable X 2,300 X 3,900 x -2,280X

Answer 1

Answer

• Requirement asked

Statement of Cash Flows (partial)
Cash flows from operating activities:
Net Income	$213,300
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation Expense	$63,800
Changes in current operating assets and liabilities:
Decrease in accounts receivables	$910
Increase in inventory	($17,200)
Decrease in prepaid expense	$460
Decrease in accounts payable	($2,600)
Increase in Salaries Payable	$980
Net cash flow from operating activities		$259,650

No.	Conceptual Notes
1	Cash Flow Statement reflects the Cash Inflows and Outflows during a period of time.
2	Effects of Non - Cash Transaction are adjusted from Net Income.
3	Depreciation Expense, Amortisation expenses are Added back to Net Income in Cash Flow Statement.
4	Decrease in Current Assets OR Increase in Current Liabilities are ADDED to Net Income
5	Increase in Current Assets OR Decrease in Current Liabilities are DEDUCTED from Net Income