The net income reported on the income statement for the curr

The net income reported on the income statement for the current year was $210,000. Depreciation recorded on equipment and a building amount to $62,500 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

Cash $56,000 $59,500

Accounts receivable (net) 71,000 73,400

Inventories 140,000 126,500

Prepaid expenses 7,800 8,400

Accounts payable (merchandise creditors) 62,600 66,400

Salaries payable 9,000 8,250

Required:

(1) Prepare the Cash flows for Operating Activities section of the statement of cash flows, using the indirect method.

Solution

Cash flows from operating activities net income for the year 210,000 Adjustments to reconcile net income Depereciation expense 62,500 Decrease in account receivable 2400 increase in inventories -13500 decrease in prepaid expense 600 Decrease in accounts payable -3800 increase in salaries payable 750 net cash flow from operating activities 258,950