Question

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Cash Flows from Operating Activities --Indirect Method The net income reported on the income statement for the current year was $124,900. Depreciation recorded on store equipment for the year amounted to $20,600. 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 $49,460 $45,010 Accounts receivable (net) 35,460 33,260 Inventories 48,420 50,640 Prepaid expenses 5,440 4,280 Accounts payable (merchandise creditors) 46,340 42,580 Wages payable 25,320 27,820 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 out flows, 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:

Answer 1

$124,900 $20,600 Statement of Cash Flows (partial) Cash flow from operating activities: Net Income Adjustments to reconcile net income to net cash flow from operating activities: Add: Depreciation expense Changes in current operating assets and liabilities: Add: Decrease in Inventories Add: Increase in Accounts Payable Less: Increase in Accounts receivable Less: Increase in Prepaid expense Less: Decrease in wages payable Net Cash flow from operating activities $2,220 $3,760 ($2,200) ($1,160) ($2,500) $145,620

b. cash flow from operating activities differ from net income because it does not use the Cash Basis of accounting. for example revenue are recorded on the income statement when Accrued.

Note: For b part of answer your given option may be different since you have not provided me the avaibale options. but i gave you best possible correct answer.

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