The net income reported on the income statement for the current year was $58,000

Question

The net income reported on the income statement for the current year was $58,000. Depreciation recorded on fixed assets for the year was $24,000. In addition, equipment with an original cost of $130,000 and accumulated depreciation of $115,000 on the date of the sale, was sold for $20,000. Balances of the current asset and current liability accounts at the end and beginning of the year are listed below.

Prepare the cash flows from operating activities section of a statement of cash flows using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

Prepare the cash flows from operating activities section of a statement of cash flows using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.

Statement of Cash Flows (partial)

1

Cash flows from operating activities:

2

3

Adjustments to reconcile net income to net cash flow from operating activities:

4

5

6

Changes in current operating assets and liabilities:

7

8

9

10

11

12

End Beginning Cash $65,000 $70,000 Accounts receivable (net) 70,000 63,000 Inventories 85,000 102,000 Prepaid expenses 4,000 4,500 Accounts payable (merchandise creditors) 50,000 58,000 Cash dividends payable 4,500 6,500 Salaries payable 6,000 7,500

Explanation / Answer

RODRIQUEZ CORPORATION Cash Flow Statement   For year ended 31 December 2017 Cash flows from operating activities Net Income $ 58,000 Adjustment to reconcile net income to: Depreciation expense $ 24,000 Gain on sale of equipment $ (5,000) Changes in current operating assets and liabilities Increase in accounts receivable $ (7,000) Decrease in inventories $ 17,000 Decrease in prepaid expenses $        500 Decrease in accounts payable $ (8,000) Decrease in Salaries payable $ (1,500) $ 20,000 Net cash provided by operating activities $ 78,000

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