Question

Help ASAP please!!

Cash Flows from Operating Activities-indirect Method Staley Inc. reported the following data: Net income Depreciation expense Loss on disposal of equipment Increase in accounts receivable $465,400 68,100 29,900 21,700 Increase in accounts payable 12,700 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 out flows, cash payments, decreases in cash, or any negative adjustments. Staley Inc. 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

Answer 1

Answer -

In the indirect method, the increase in operating assets deducts from net income because it indicates the cash outflow. In other words, purchasing or acquisition of asset made by cash and increase in liabilities add to net income because it indicates the cash inflow. In other words, expenses incurred are greater compare to the payment made for them.

Now,

Staley Inc.
Statement of Cash Flows (partial)
Cash flows from operating activities:
Net income	$465,400
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	$68,100
Loss on disposal of equipment	$29,900
Changes in current operating assets and liabilities:
Increase in accounts receivable	-$21,700
Increase in accounts payable	$12,700
Net cash flow from operating activities		$554,400

     

Calculation:

Net cash flow from operating activities = Net income + Deprecation expense + Loss on disposal of equipment - Increase in accounts receivable + Increase in accounts payable

= $465,400 + $68,100 + $29,900 - $21,700 + $12,700

= $554,400