M12-5 Computing Cash Flows from Operating Activities (Indirect Method) [LO 12-2]

Question

M12-5 Computing Cash Flows from Operating Activities (Indirect Method) [LO 12-2] The two independent cases are listed below: Case A Case B Year 2 Year 1 Year 2 Year 1 Sales Revenue Cost of Goods Sold Gross Profit Depreciation Expense Salaries and Wages Expense Net Income Accounts Receivable Inventory Accounts Payable Salaries and Wages Payable S 10,500 S 6,500 $20,500 $ 15,500 5,5503,500 11,550 9,050 4.950 3.000 8,950 6,450 1,000 1,000 1,250 1,250 4,500 700 575 750 920 400 4,500 500 3,200 700 705 850 325 2,000 1,950 275 725 750 1,500 350 450 675 975 1,150 Show the operating activities section of the statement of cash flows for year 2 using the indirect method (Amounts to be deducted should be indicated with a minus sign.) Case A Case B Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Changes in Assets and Liabilities

Explanation / Answer

Cash flows from Operating activities CaseA CaseB Net income for the yeear 1950 3200 Adjustment to reconcile the income Depreciation 1000 1250 Change in Assets and liabilities Change in Accounts receivable 75 -125 Chnages in Inventory -275 45 Changes in Accounts payable 75 -70 Change in Salaries and wages payable -175 -75 Net cassh provided from Operating activities 2650 4225

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