Fredericks Company reported net income of $320,000 for the current year. Depreci

Question

Fredericks Company reported net income of $320,000 for the current year. Depreciation recorded on buildings and equipment amounted to $75,000 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 $22,000 $15,000

Accounts receivable 17,000 32,000

Inventories 55,000 65,000

Prepaid expenses 7,500 5,000

Accounts payable 14,000 18,000

Income taxes payable 600 1,200

Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

Explanation / Answer

Cash flow statement of Fredericks Company for the year ended Particulars amount($) net income 320000 Depreciation 75000 Decrease Accounts receivable 15000 Decrease in inventory 10000 Increase in prepaid expenses -2500 Decrease in Accounts payable -4000 Decrease in income tax payable -1200 Net cash flows from operating expenses 412300

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