The net income reported on the income statement for thecurrent year was $165,300

Question

The net income reported on the income statement for thecurrent year was $165,300. Depreciation recorded on equipmentand a building amounted to $46,700 for the year. Balances ofthe current asset and current liability accounts at the beginningand end of the year are as follows:                                                                     End ofyear         Beginningof year Cash                                                             42,000                 43,500   Accountsreceivable(net)                                65,000                 69,200 Merchandiseinventory                                   125,900               115,100 prepaidexpenses                                           5,800                   6,400 Accounts payable(merchandisecreditors)       61,400                 64,200 Wagespayable                                              8,300                    8,000 a. Prepare the cash flows from operating activitiessection of the statement of cash flows, using the indirectmethod. b. If the direct method had been used, woiuld the netcash flow from operating activites have been the same? The net income reported on the income statement for thecurrent year was $165,300. Depreciation recorded on equipmentand a building amounted to $46,700 for the year. Balances ofthe current asset and current liability accounts at the beginningand end of the year are as follows:                                                                     End ofyear         Beginningof year Cash                                                             42,000                 43,500   Accountsreceivable(net)                                65,000                 69,200 Merchandiseinventory                                   125,900               115,100 prepaidexpenses                                           5,800                   6,400 Accounts payable(merchandisecreditors)       61,400                 64,200 Wagespayable                                              8,300                    8,000 a. Prepare the cash flows from operating activitiessection of the statement of cash flows, using the indirectmethod. b. If the direct method had been used, woiuld the netcash flow from operating activites have been the same?

Explanation / Answer

Net Income for the year 165,300.00 Add: Decrease in Accounts Receivable 4,200.00 Decrease in Prepaid Expenses 600.00 Increase in Wages Payable 300.00 Depreciation 46,700.00 51,800.00 Less: Increase in Merchandise Inventory (10,800.00) Decrease in Accounts Payable (2,800.00) (13,600.00) Cash from OperatingActivities 203,500.00

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