The net income reported on an income statement for the current year was $58,000.

Question

The net income reported on an income statement for the current year was $58,000. Depreciation recorded on fixed assets for the year was $24,000. Balances of the current assets and current liability accounts at the end and beginning of the year are listed below. Prepare the cash flows from operating activites section of a statement of cash flows using the indirect method.

                                                                                     End    Beginning
Cash                                                                            $65,000    $70,000
Accounts Receivable (net)                                       70,000 63,000
Inventories 85,000    102,000
Prepaid Expenses    4,000                                             4,500
Accounts Payable
(merchandise creditors)                                            50,000                                         58,000
Cash dividends Payable                                            4,500    6,500
Salaries Payable                                                          6,000 7,500

Explanation / Answer

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Please find the answer as follows:

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Cash Flow from Operating Activities
Net Income 58000 Add Depreciation 24000 Less Increase in Accounts Receivables -7000 Add Decrease in Inventories 17000 Add Decrease in Prepaid Expenses 500 Less Decrease in Accounts Payables -8000 Less Decrease in Salary Payable -1500 Cash Provided by Operating Activities 83000

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