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Cash Flows from Operating ActivitiesIndirect Method

The net income reported on the income statement for the current year was $138,600. Depreciation recorded on store equipment for the year amounted to $22,900. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year		Beginning of Year
Cash	$55,160		$50,750
Accounts receivable (net)	39,550		37,500
Inventories	54,000		57,090
Prepaid expenses	6,070		4,820
Accounts payable (merchandise creditors)	51,680		48,010
Wages payable	28,240		31,360

Question Content Area

a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Statement of Cash Flows (partial)

Cash flows from operating activities:
Decrease in prepaid expensesDepreciationIncrease in inventoriesNet income	$- Select -
Adjustments to reconcile net income to net cash flow from operating activities:
Decrease in accounts payableDecrease in accounts receivableDepreciationIncrease in wages payable	- Select -
Changes in current operating assets and liabilities:
DepreciationIncrease in accounts receivableIncrease in inventoriesIncrease in wages payable	- Select -
Decrease in accounts receivableDecrease in inventoriesDecrease in prepaid expensesIncrease in inventories	- Select -
Decrease in accounts receivableIncrease in inventoriesIncrease in prepaid expensesIncrease in wages payable	- Select -
Decrease in accounts payableDepreciationIncrease in accounts payableIncrease in wages payable	- Select -
Decrease in accounts receivableDecrease in prepaid expensesDecrease in wages payableIncrease in wages payable	- Select -
Net cash flow from operating activities		$fill in the blank 9e6302fb5054fed_15

Question Content Area

b. Cash flows from operating activities differs from net income because it does not use the

accrual basiscash basis

of accounting. For example revenues are recorded on the income statement when

they are earnedcash is received

.

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