Gregson Company had the following noncash current asset and current liabilities

Question

Gregson Company had the following noncash current asset and current liabilities balances at the end of 2010 and 2011:

Net income for 2011 was $750,000 and depreciation expense was $40,000. All sales and all purchases are on account. Gregson uses the indirect method for preparing the statement of cash flows.

Net cash flows from operating activities for 2011 would be?

2010 2011 Accounts receivable $60,000 $68,000 Inventory 230,000 210,000 Prepaid insurance 15,000 13,000 Accounts payable 20,000 30,000

Explanation / Answer

Answer:

Therefore, Net cash flows from operating activities for 2011 would be $814000.

Explanation:

All increase or decrease is calculated by subtracting the beginning balance from the ending balance.

Gregson company Statement of cash flows (Indirect method) For the year ended June 30, 2015 Cash Flow from operating activities: Net income 750000 Adjustment to reconcile net income to net cash provided by operating activities: Add:Depreciation expense 40000 Changes in current assets and laibilities: Less: Increase in accounts receivables 8000 Add: Decrease in inventory 20000 Add: Decrease in prepaid insurance 2000 Add: Increase in accounts payable 10000 Net cash flow from operating activities 814000

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