Homework SourseThe net income reported on the income statement for the curr
The net income reported on the income statement for the current year was $58,000. Depreciation recorded on equipment and a building amount to $24,000 for the year. Balances of the current asset and current liabilities accounts at the beginning and end of the year are as follows:
End of Year
Beginning of Year
Change
Cash
$65,000
$70,000
Accounts receivable (net)
70,000
63,000
Inventories
85,000
102,000
Prepaid expenses
4,000
4,500
Accounts payable
(merchandise creditors)
50,000
58,000
Salaries payable
7,500
6,000
Cash dividends payable
4,500
6,500
Prepare the Cash flows for Operating Activities section of the statement of cash flows, using the indirect method
| End of Year | Beginning of Year | Change | |
| Cash | $65,000 | $70,000 | |
| Accounts receivable (net) | 70,000 | 63,000 | |
| Inventories | 85,000 | 102,000 | |
| Prepaid expenses | 4,000 | 4,500 | |
| Accounts payable (merchandise creditors) | 50,000 | 58,000 | |
| Salaries payable | 7,500 | 6,000 | |
| Cash dividends payable | 4,500 | 6,500 |
Solution
Solution:
| Cash Flows from operating activities | 58,000 | |
| Net income, per income statement | ||
| Add: Depreciation | 24,000 | |
| Decrease in inventories | 17,000 | |
| Decrease in prepaid expenses | 500 | |
| Increase in salaries payable | 1,500 | 43000 |
| Deduct: | ||
| Increase in accounts receivable (net) | 7,000 | |
| Decrease in accounts payable | 8,000 | -15,000 |
| Net cash fow from operating activities | 86,000 |
