Question

Kentucky Company uses the indirect method to prepare the statement of cash flows. Refer to the following income statement: Kentucky Company Income Statement Year Ended December 31, 2019 Sales Revenue $ 247,000 Interest Revenue 2,200 Gain on Sale of Plant Assets 5,900 Total Revenues and Gains $ 255, 100 Cost of Goods Sold 118,000 Salary Expense 45,000 Depreciation Expense 10,000 Other Operating Expenses 24,000 Interest Expense 1,800 Income Tax Expense 5,500 Total Expenses 204,300 Net Income (Loss) $ 50, 800 Additional information provided by the company includes the following: 1. Current assets, other than cash, increased by $ 21,000 2. Current liabilities decreased by $ 1,200 Compute the net cash provided by (used for) operating activities. A. S 32,700 B. $ 38, 600 C. $ 28,600 D. $ 13,000

Answer 1

*Option(A). $32,700.

*Operating activities: It focuses on cash effects on transcation that create revenues and expenses.

*Changes in Noncash Current Assets: Deduct from net income increases in current asset accounts, and Add to

net income decreases in current asset accountss and vice versa.

*Opertaing activities - Indirect Method requires follows adjustments:

1. Non cash charges such as depreciation.

2. Gain and Losses on disposal of plant assets;

3. Changes in current assets and current liabilities asjustments.

$ 50,800 Kentucky Company Statement of Cash Flow-Indirect Method For the Year Ended December 31,2019 CASH FLOWS FROM OPERATING ACTIVITIES Net Income Adjustments to reconcile net income to net cash: Add: Deprecication expense $ 10,000 Less: Gain on disposal of plant assets 5,900 Changes in Current Asset and Current Liabilty: Increase in Current assets 21,000 Decrease in Current Liabilities 1,200 Net cash provided by (used in) operating activities 18,100 $ 32,700 Notes: Non-Cash Charges: Depreciation Expenses Amortization Expense Loss on disposal of plant assets Gain on disposal of plant assets Changes in current assets and current liabilities: Increase in current asset accounts Decrease in current asset accounts Increase in current liability accounts Decrease in current liability accounts Add Add Add Deduct Deduct Add Add Deduct

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