The following income statement and information about changes in noncash current
ID: 2396767 • Letter: T
Question
The following income statement and information about changes in noncash current assets and current liabilities are reported.
SONAD COMPANY
Income Statement
For Year Ended December 31, 2017
Sales
$
1,515,000
Cost of goods sold
742,350
Gross profit
772,650
Operating expenses
Salaries expense
$
207,555
Depreciation expense
36,360
Rent expense
40,905
Amortization expenses–Patents
4,545
Utilities expense
16,665
306,030
466,620
Gain on sale of equipment
6,060
Net income
$
472,680
Changes in current asset and current liability accounts for the year that relate to operations follow.
Accounts receivable
$
44,400
increase
Accounts payable
$
9,125
decrease
Inventory
25,325
increase
Salaries payable
4,050
decrease
Required:
Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
SONAD COMPANY
Income Statement
For Year Ended December 31, 2017
Sales
$
1,515,000
Cost of goods sold
742,350
Gross profit
772,650
Operating expenses
Salaries expense
$
207,555
Depreciation expense
36,360
Rent expense
40,905
Amortization expenses–Patents
4,545
Utilities expense
16,665
306,030
466,620
Gain on sale of equipment
6,060
Net income
$
472,680
Explanation / Answer
SONAD COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities;
Net Income
$472,680
Adjustments to reconcile net income to net cash provided by operating activities
Add : Depreciation Expenses
36,360
Add : Amortization expense—Patents
4,545
Less : Gain on sale of equipment
(6,060)
Changes in current operating assets and liabilities
Less : Increase in accounts receivable
(44,400)
Less : Increase in inventory
(25,325)
Less : Decrease in accounts payable
(9,125)
Less : Decrease in salaries payable
(4,050)
(48,055)
Net cash provided by operating activities
424,625
SONAD COMPANY
Statement of Cash Flows
For Year Ended December 31, 2017
Cash flows from operating activities;
Net Income
$472,680
Adjustments to reconcile net income to net cash provided by operating activities
Add : Depreciation Expenses
36,360
Add : Amortization expense—Patents
4,545
Less : Gain on sale of equipment
(6,060)
Changes in current operating assets and liabilities
Less : Increase in accounts receivable
(44,400)
Less : Increase in inventory
(25,325)
Less : Decrease in accounts payable
(9,125)
Less : Decrease in salaries payable
(4,050)
(48,055)
Net cash provided by operating activities
424,625
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