The next part of this alternative is to show the impact of changes in balance sh
ID: 2513149 • Letter: T
Question
The next part of this alternative is to show the impact of changes in balance sheet accounts (typically current assets and liabilities) as they affect Net Income “accrual based” to Net Cash Flow. Just as when Accounts Receivables balance sheet balances will increase from one year to the next if the cash collected during the year is LESS THAN revenue, the increase will be “subtracted” from Net Income to arrive and Net Cash Flows. Below is a list of accounts from a comparative balance sheet. For each, calculate the “change” from year 1 to year 2 and then indicate whether this change needs to be “added” or “subtracted” on the statement of cash flows.
Account
Year 2
Year 1
Change (calculate)
“added” (+) or “subtracted” (-)
Accounts Receivable
$40,000
$32,000
Unearned Revenue
110,000
70,000
added
Prepaid Insurance
52,000
45,000
Prepaid rent
7,000
4,000
Payroll tax payable
75,000
63,000
Inventory
145,000
122,000
subtracted
Accounts payable
220,000
240,000
20,000
Prepaid taxes
8,400
6,500
Utilities payable
38,000
41,000
Account
Year 2
Year 1
Change (calculate)
“added” (+) or “subtracted” (-)
Accounts Receivable
$40,000
$32,000
Unearned Revenue
110,000
70,000
added
Prepaid Insurance
52,000
45,000
Prepaid rent
7,000
4,000
Payroll tax payable
75,000
63,000
Inventory
145,000
122,000
subtracted
Accounts payable
220,000
240,000
20,000
Prepaid taxes
8,400
6,500
Utilities payable
38,000
41,000
Explanation / Answer
Account Year 2 Year 1 Change (calculate) “added” (+) or “subtracted” (-) Accounts Receivable $40,000.00 $32,000.00 $8,000.00 Subtracted Unearned Revenue $110,000.00 $70,000.00 $40,000.00 Added Prepaid Insurance $52,000.00 $45,000.00 $7,000.00 Subtracted Prepaid rent $7,000.00 $4,000.00 $3,000.00 Subtracted Payroll tax payable $75,000.00 $63,000.00 $12,000.00 Added Inventory $145,000.00 $122,000.00 $23,000.00 Subtracted Accounts payable $220,000.00 $240,000.00 -$20,000.00 Subtracted Prepaid taxes $8,400.00 $6,500.00 $1,900.00 Subtracted Utilities payable $38,000.00 $41,000.00 -$3,000.00 Subtracted
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.