The net income reported on the income statement for the current year was $720,00

Question

The net income reported on the income statement for the current year was $720,000. Depreciation recoreded on store equipment for the year amounted to $32,700. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

End of Year Beginning of Year
Cash $78,450 $ 72,300
Accounts receivable(net) $56,250 $ 53,400
Merchandise inventory $76,800 $ 81,330
Prepaid Expenses $ 9,000 $ 6,900
Accounts Payable(merchandise creditors) $73,500 $68,400
Wages Payable $40,200 $44,700


Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method.

Explanation / Answer

Net income

720,000

Adjustments to net income:

Depreciation

32,700

Increase in AR

(6,150)

Decrease in inventory

4,530

Increase in prepaid expenses

(2,100)

Increase in AP

5,100

Decease in wage payable

(4,500)

Cash from operating activities

749,580

Net income

720,000

Adjustments to net income:

Depreciation

32,700

Increase in AR

(6,150)

Decrease in inventory

4,530

Increase in prepaid expenses

(2,100)

Increase in AP

5,100

Decease in wage payable

(4,500)

Cash from operating activities

749,580

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