Question

The net income reported on the income statement for the current year was $317,696. Depreciation recorded on fixed assets and amortization of patents for the year were $40,292 and $8,491, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: End Beginning Cash $55,431 $45,273 Accounts Receivable 103,027 Inventories 125,331 104,959 2,309 52,516 Prepaid Expenses Accounts Payable (merchandise creditors) 94,246 6,109 72,543 What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method? a. $317,235 b. $333,462 c. $401,897 d. $313,060

Answer 1

Answer 1)

Calculation of cash flow from operating activities

Particulars	Amount (in $)
Cash Flow from operating activities
Net Income	317,696
Add: Depreciation on fixed assets	40,292
Add: Amortization of patents	8,491
	366,479
Add: Decrease in current assets/ Increase in current liabilities
Prepaid Expenses ($ 6,109 - $ 2,309)	3,800
Less: Increase in current assets/ Decrease in current liabilities
Accounts Receivable ($ 125,331 - $ 103,027)	22,304
Inventories ($ 104,959 - $ 94,246)	10,713
Accounts Payable ($ 72,543 - $ 52,516)	20,027
Cash Flow from Operating Activities	317,235

The cash flow from operating activities is $ 317,235. Therefore the correct option is (a)

Answer 2)

Calculation of amount of dividend paid during the year

Particulars	Amount (in $)
Cash Dividend payable in the beginning of the year	9,461
Add: Cash Dividend declared during the period	87,957
Total Dividend Payable	97,418
Less: Cash dividend payable in the end of the year	15,255
Cash dividend paid during the year	82,163

Note: The balance of dividend payable in the beginning of the period was $ 9,461. Also the company declared $ 87,957 as dividend during the year. Thus, the total dividend payable was $ 97,418. Of this $ 15,255 was payable at the end of the year. Thus the dividend paid during the period was $ 82,163 (i.e. $ 97,418 - $ 15,255).

Thus the correct option is (d) i.e. $ 82,163