70.2K

Verified Solution

Link Copied!

Cash Flows from Operating ActivitiesIndirect Method

The net income reported on the income statement for the current year was $202,400. Depreciation recorded on equipment and a building amounted to $60,500 for the year. 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	$56,470		$59,860
Accounts receivable (net)	71,600		73,870
Inventories	141,180		127,260
Prepaid expenses	7,850		8,440
Accounts payable (merchandise creditors)	63,080		66,800
Salaries payable	9,090		8,320

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 accounts receivable	- Select -
Changes in current operating assets and liabilities:
Decrease in accounts receivableDecrease in salaries payableDepreciationIncrease in accounts receivable	- Select -
Decrease in inventoriesIncrease in accounts receivableIncrease in inventoriesIncrease in prepaid expenses	- Select -
Decrease in prepaid expensesIncrease in accounts payableIncrease in accounts receivableIncrease in prepaid expenses	- Select -
Decrease in accounts payableDecrease in salaries payableDepreciationIncrease in accounts payable	- Select -
Decrease in salaries payableIncrease in accounts receivableIncrease in prepaid expensesIncrease in salaries payable	- Select -
Net cash flow from operating activities		$fill in the blank 746dd7046faa06b_15

b. If the direct method had been used, would the net cash flow from operating activities have been the same?

NoYes

Answer & Explanation Solved by verified expert

See Answer