The net income reported on the income statement for the current year was $210,00

Question

The net income reported on the income statement for the current year was $210,000. Depreciation recorded on equipment and a building amount to $62,500 for the year. Balances of the current asset and current liabilities accounts at the beginning and end of the year are as follows:

End of Year Beginning of Year

Cash $56,000 $59,500

Accounts receivable (net) 71,000 73,400

Inventories 140,000 126,500

Prepaid expenses 7,800 8,400

Accounts payable (merchandise creditors) 62,600 66,400

Salaries payable 9,000 8,250

Required:

(1) Prepare the Cash flows for Operating Activities section of the statement of cash flows, using the indirect method.

Explanation / Answer

Cash flows from operating activities net income for the year 210,000 Adjustments to reconcile net income Depereciation expense 62,500 Decrease in account receivable 2400 increase in inventories -13500 decrease in prepaid expense 600 Decrease in accounts payable -3800 increase in salaries payable 750 net cash flow from operating activities 258,950

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