Cemptex Corporation prepares its statement of cash flows using the indirect meth

ID: 2398358 • Letter: C

Question

Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2018 fiscal year was $659,000. Depreciation and amortization expense of $94,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilties other than cash: Decrease in accounts receivable Increase in inventories Increase prepaid expenses Increase in salaries payable Decrease in income taxes payable $29,000 9,900 9,200 10,700 18,000 Required: Prepare the operating activities section of the 2018 statement of cash flows. (Amounts to be deducted should be indicated with a minus sign.) Cash flows from operating activities: Adjustments for noncash effects: Changes in operating assets and liabilities: Net cash flows from operating activities

Explanation / Answer

Cashflow from operating activities (Indirect method)

Particulars

Amount

Cash flow from operating activities

Net income for the fiscal year

$6,59,000

Adjustment for non-cash effects:

Depreciation and amortisation

$94,000

Changes in operating assets and liabilities:

Add: Decrease in accounts receivable

$29,000

Less: Increase in inventories

($9,900)

Less: Increase in prepaid expenses

($9,200)

Add: Increase in salary payable

$10,700

Less: Decrease in income tax payable

($18,000)

Total

$2,600

Net cashflows from operating activities

$7,55,600