The net income reported on the income statement for the curr

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets was $40,000. Balances of accounts receivable and accounts payable at the end and at the beginning of the year are as follows:

End

Beginning

Accounts receivable

112,000

108,000

Accounts payable

75,000

89,000

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

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	End	Beginning
Accounts receivable	112,000	108,000
Accounts payable	75,000	89,000

Solution

Cash flow from operating activities: (Indirect Method) Net Income $       2,75,000 Reconcile net income to net cash flow from operating actiivties: Depreciation               40,000 Increase of accounts receivable -4,000 Decrease of accounts payable             -14,000 Net Cash provided by operating activities           2,97,000