The net income reported on the income statement for the current year was $296,20

Question

The net income reported on the income statement for the current year was $296,200. Depreciation recorded on equipment and a building amounted to $88,600 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. If needed, use the minus sign to indicate cash outflows or negative amounts.

b. If the direct method had been used, would the net cash flow from operating activities have been the same? Yes or no?
Correct 1 of Item 2

Explain.

End of Year Beginning of Year Cash $74,640 $77,630 Accounts receivable (net) 94,640 95,800 Inventories 186,600 165,040 Prepaid expenses 10,370 10,950 Accounts payable (merchandise creditors) 83,370 86,640 Salaries payable 12,020 10,790

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Cash Flow from Operating Activities:

Part B

Yes, the cash flow would have been same under both the methods.

Thanks.

Net Income 296200 Add Depreciation 88600 Decrease in Accounts Receivable 1160 Decrease in Prepaid Expenses 580 Increase in Salaries Payable 1230 Less Increase in Inventories -21560 Decrease in Accounts Payable -3270 Cash Flow from Operating Activities 362940

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