Left side possible choices: also 1 more :Operating expense Portions of the finan

Question

Left side possible choices:

also 1 more :Operating expense

Portions of the financial statements for Software Associates are provided below. SOFTWARE ASSOCIATES Income Statement For the year ended December 31, 2015 Net sales Expenses: 5 700,000 Cost of goods sold Operating expenses Depreciation expense Income tax expense 5415,000 129,000 32,900 48,500 Total expenses 625,400 Net income 5 74,800 SOFTWARE ASSOCIATES Selected Balance Sheet Data December 31, 2015, compared to December 31, 2014 Decrease in accounts receivable Increase in prepaid rent Decrease in salaries payable Increase in accounts payable Increase in income tax payable S9,900 12,900 2,900 3,900 6,900 7,900 Required: Prepare the operating activities section of the statement of cash flows for Software Associates using the indirect method. (List cash outflows as negative amounts.) SSOCIATE S Statement of Cash Flows (partial) For the Year Ended December 31, 2015 Cash Flows from Operating Activities: Adjustments to reconcile net income to net cash flows from operating activities Net cash flows from operating activities

Explanation / Answer

The following is the indirect method formula to calculate net cash flow from operating activities:

Cash Flows from Operating Activities: Net Income + Non-Cash Expenses: (Depreciation, Depletion & Amortization Expense) + Non-Operating Losses: (Loss on Sale of Non-Current Assets) Non-Operating Gains: (Gain on Sale of Non-Current Assets) + Decrease in Current Assets: (Accounts Receivable, Prepaid Expenses, Inventory etc.) Increase in Current Assets + Increase in Current Liabilities: (Accounts Payable, Accrued Liabilities, Income Tax Payable etc.) Decrease in Current Liabilities = Net Cash Flow from Operating Activities

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