Reporting and Interpreting Cash Flows from Operating Activities from an Analyst's Perspective (Indirect Method)
Capaz Company completed its income statement and balance sheet for 2012 and provided the following information:
Income Statement for 20I2 | ||
Service revenue | $53,000 | |
Expenses | ||
Salaries | $41,000 |
|
Depreciation | 7,000 | |
Amortization of copyrights | 200 | |
Other expenses | 9,700 | 57,900 |
Net loss |
| $(4,900 ) |
| ||
Partial Balance Sheet | 2012 | 2011 |
Accounts receivable | $8,000 | $15,000 |
Salaries payable | 15,000 | 1,000 |
Other accrued liabi lities | 1,000 | 5,100 |
In addition, Capaz bought a small service machine for $5,000.
Required:
1. Present the operating activities section of the statement of cash flows for Capaz Company using the indirect method.
2. What were the major reasons that Capaz was able to report a net loss but positive cash flow from operations? Why are the reasons for the difference between cash flow from operations and net income important to financial analysts?
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