The net income reported on the income statement for the current year was $116,00

ID: 2433170 • Letter: T

Question

The net income reported on the income statement for the current year was $116,000. Depreciation recorded on store equipment for the year amounted to $19,100. 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 Accounts receivable (net) Merchandise inventory Prepaid expenses Accounts payable (merchandise creditors) Wages payable $46,400 33,270 45,430 5,100 43,480 23,760 $42,690 31,550 48,030 4,060 40,380 26,380 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, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Net income 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 of accounting. b. Cash flows from operating activities differs from net income because it does not use the For example revenues are recorded on the income statement when

Explanation / Answer

Answers

Cash flows from Operating Activities:

Net Income

$ 116,000.00

Adjustments………:

Depreciation expenses

$ 19,100.00

Changes in current operating assets and liabilities:

Increase in Accounts receivables

$ (1,720.00)

Decrease in Inventory

$ 2,600.00

Increase in prepaid expenses

$ (1,040.00)

Increase in Accounts payable

$ 3,100.00

Decrease in Wages payable

$ (2,620.00)

Net Cash flow from Operating activities

$ 135,420.00

Cash flows from Operating activities differs from Net Income because it does not use the ACCRUAL BASIS of accounting. For example, revenues are recorded on the income statement when EARNED.