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Question 3 Wise Photography reported net income of $103,500 for 2020. Included in the income statement were depreciation expe
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Solution:

Wise Photography

Statement of Cash Flow

For year ended December 31, 2020

Cash Flows from Operating Activity
Net Income $103,500
Adjustments to reconcile net income to
Net cash flow from operating activities:
Depreciation expenses $3,700
Amortization expenses $3,500
Gain on disposal of plant asset ($3,800)
Decrease in accounts receivable $5,700
Increase in accounts receivable $3,400
$12,500
Net cash flow from operating activities $116,000

Explanation:

1. Non cash and non operating expenses are added to net income.
2. Non cash and non operating income are deducted from net income.
3. Decrease in current liabilities and increase in current assets other than cash are added to net income.
4. Increase in current liabilities and decrease in current assets other than cash are added to net income.
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