Question

Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $128,100. Depreciation recorded on store equipment for the year amounted to $21,100. 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 $51,370 $46,750 Accounts receivable (net) 36,830 34,550 Merchandise inventory 50,290 52,590 Prepaid expenses 5,650 4,440 Accounts payable (merchandise creditors) 48,130 44,230 Wages payable 26,300 28,890 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: Net Income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable Increase in wages payable

Answer 1

The income statement are prepared on accrual basis of accounting and the cash flow statement are prepared on cash basis.

Revenues are recorded in income statement on the basis of actual receipt basis.

If any clarification please comment.