Lansing Company’s 2017 income statement and selected balance sheet data (for cur

Question

Lansing Company’s 2017 income statement and selected balance sheet data (for current assets and current liabilities) at December 31, 2016 and 2017, follow. LANSING COMPANY Income Statement For Year Ended December 31, 2017 Sales revenue $ 124,200 Expenses Cost of goods sold 51,000 Depreciation expense 16,500 Salaries expense 27,000 Rent expense 9,900 Insurance expense 4,700 Interest expense 4,500 Utilities expense 3,700 Net income $ 6,900 LANSING COMPANY Selected Balance Sheet Accounts At December 31 2017 2016 Accounts receivable $ 6,500 $ 7,600 Inventory 2,880 1,990 Accounts payable 5,300 6,400 Salaries payable 1,060 790 Utilities payable 400 250 Prepaid insurance 350 460 Prepaid rent 400 270 Required: Prepare the cash flows from operating activities section only of the company’s 2017 statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) Required: Prepare the cash flows from operating activities section only of the company’s 2017 statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

Explanation / Answer

SOLUTION

1. Cash flow from operating activities- Indirect Method

2. Cash flow from operating activities- Direct Method

Particulars Amount ($) CASH FLOW FROM OPERATING ACTIVITIES Net income 6,900 Adjustment to reconcile net income Depreciation 16,500 Decrease account receivable (7,600-6,500) 1,100 Increase inventory (2,880-1,990) (1,690) Decrese account payable (6,400-5,300) (1,100) Increase salaries payable (1,060-790) 270 Increase utitlites payable (400-250) 150 Decrease prepaid insurance (460-350) 110 Increase prepaid rent (400-270) (130) NET CASH FLOW FROM OPERATING ACTIVITIES 22,110

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