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Book Show Me How Calculator cash flows from operating activities-indirect method Instructions Amount Descriptions Statement o
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Answer #1

Solution:

Requirement A: Cash flows from Operating Activities section

Statement of Cash flows - Operating Activities
Cash flows from operating activities:
Net income $ 334,100
Adjustments to reconcile to operating cash flow
Depreciation expense $        101,710
Decrease in Account Receivables $             6,910
Increase in Inventory $        (16,640)
Decrease in Prepaid Expenses $             1,980
Increase in Salaries Payable $             1,880
Decrease in Account Payable ( Merchandise creditors) $           (7,570) $    88,270
      Net cash flows from operating activities $ 422,370

Requirement B:

Yes, Net cash flows from operating activities will be the same even we use direct method.

Reason:

1) The main differences between the both method is presentation of cash flows in operating section.

2) Direct method starts with by taking cash transactions into consideration

3) Where as indirect method starts from net income and make on adjusting non cash activities and current assets and liabilities.

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