Cash Flows from Operating Activities—Indirect Method The net income reported on

Question

Cash Flows from Operating Activities—Indirect Method
The net income reported on the income statement for the current year was $229,700. Depreciation recorded on equipment and a building amounted to $68,700 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
    End of Year   Beginning of Year
Cash   $62,940      $67,350     
Accounts receivable (net)   79,810      83,110     
Inventories   157,350      143,190     
Prepaid expenses   8,750      9,500     
Accounts payable (merchandise creditors)   70,300      75,160     
Salaries payable   10,130      9,360     

Hide      
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash and for any adjustments, if required.

  
Statement of Cash Flows (partial)
  
Cash flows from operating activities:
  

$

Adjustments to reconcile net income to net cash flow from operating activities:
  

  

Changes in current operating assets and liabilities:
  

  

  

  

  

  

  

  

  

  

Net cash flow from operating activities
$

b. If the direct method had been used, would the net cash flow from operating activities have been the same?

Explanation / Answer

Answer a. Cash Flow Statement (Indirect Method) For the year ended Dec. 31, 2011 Particulars Amount I. Cash Flow from operation Net Income as per Income Staement        229,700 Adjustment for Non-cash and Non-Operating Items Add: Depreciation exp. On Building & equipment          68,700 Operating Profit before changes in Working Capital        298,400 Add: Decrease in Accounts Receivables              3,300 Less: Increase in Inventory         (14,160) Add: Decrease in Prepaid Expenses                  750 Less: Decrease in Accounts Payables            (4,860) Add: Increase in Salaries Payables                  770        (14,200) Net Cash Flow from (Used in) Operating activities        284,200 Answer b. If the direct method had been used, net cash flow from operating activities would have been the same.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.