PA12-2 Computing Cash Flows from Operating Activities (Indirect Method) [LO 12-2
ID: 2404174 • Letter: P
Question
PA12-2 Computing Cash Flows from Operating Activities (Indirect Method) [LO 12-2] The income statement and selected balance sheet information for Direct Products Company for the year ended December 31 are presented below Income Statement $40,600 Sales Revenue Expenses 17,000 1,200 Salaries and Wages Expense8,200 3,700 1,500 1,400 1,000 Cost of Goods Sold Depreciation Expense Rent Expense Insurance Expense Interest Expense Utilities Expense Net Income $ 6,600 Selected Balance Sheet Accounts Ending Beginning Balances Balances Accounts Receivable Inventory Accounts Payable Prepaid Rent Prepaid Insurance Salaries and Wages Payable Utilities Payable $ 575 810 435 31 28 64 26 610 680 490 23 34 42 Required Prepare 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.)Explanation / Answer
DIRECT PRODUCTS COMPANY
Statement of Cash Flows [Partial]
For the Year Ended December 31
Amount ($)
Cash Flows from Operating Activities
Net Income
6,600
Adjustments to reconcile net income to Net cash provided by operating activities
Add : Depreciation Expenses
1,200
Add : Decrease in Accounts Receivables
35
Less : Increase in Inventory
-130
Less : Decrease in Accounts Payable
-55
Less : Increase in Prepaid Rent
-8
Add : Decrease in Prepaid Insurance
6
Add : Increase in Salaries and Wages Payable
22
Add : Increase in Utilities Payable
8
Total Adjustments
1,078
Net Cash provided by Operating Activities
7,678
DIRECT PRODUCTS COMPANY
Statement of Cash Flows [Partial]
For the Year Ended December 31
Amount ($)
Cash Flows from Operating Activities
Net Income
6,600
Adjustments to reconcile net income to Net cash provided by operating activities
Add : Depreciation Expenses
1,200
Add : Decrease in Accounts Receivables
35
Less : Increase in Inventory
-130
Less : Decrease in Accounts Payable
-55
Less : Increase in Prepaid Rent
-8
Add : Decrease in Prepaid Insurance
6
Add : Increase in Salaries and Wages Payable
22
Add : Increase in Utilities Payable
8
Total Adjustments
1,078
Net Cash provided by Operating Activities
7,678
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