The income statement disclosed the following items for 2016: Balances of the cur
ID: 2592297 • Letter: T
Question
The income statement disclosed the following items for 2016:
Balances of the current assets and current liability accounts changed between December 31, 2015, and December 31, 2016, as follows:
Increase (Decrease)
A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows
A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.
, 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.
Question not attempted.
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
Solution
B. Briefly explain why net cash flows from operating activities is different than net income.
Cash flows from operating activities differs from net income because it does not use the selector 1
accrual basis
cash basis
of accounting. For example, revenues are recorded on the income statement when selector 2
they are earned
cash is received
.
Depreciation expense $53,120 Gain on disposal of equipment 40,300 Net income 449,800Explanation / Answer
Answer:
A
Statement of Cash Flows (partial)
Amount $
Amount $
Cash flows from operating activities:
Net income
449800
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation expense
53120
Gain on disposal of equipment
-40300
Changes in current operating assets and liabilities:
Accounts receivable
($7,420)
Inventory
6,060
Prepaid insurance
1,660
Accounts payable
($5,060)
Income taxes payable
1,250
Dividends payable
2,400
Net adjustment
11710
Cash flows from operating activities:
461510
b)
Briefly explain why net cash flows from operating activities is different than net income.
Answer:
Because certain items which are treated differently in income statement and in cash flow statement
Cash flows from operating activities differs from net income because it does not use the accrual basis
revenues are recorded on the income statement when cash is received
Statement of Cash Flows (partial)
Amount $
Amount $
Cash flows from operating activities:
Net income
449800
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation expense
53120
Gain on disposal of equipment
-40300
Changes in current operating assets and liabilities:
Accounts receivable
($7,420)
Inventory
6,060
Prepaid insurance
1,660
Accounts payable
($5,060)
Income taxes payable
1,250
Dividends payable
2,400
Net adjustment
11710
Cash flows from operating activities:
461510
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.