Hampton Company reports the following information for its re

Hampton Company reports the following information for its recent calendar year Income Statement Data Selected Year-End Balance Sheet Data Accounts receivable increase Inventory decrease $10,000 16,000 1,000 $160,000 Sales Expenses Cost of goods sold Salaries expense Depreciation expense12,000 00,000 Salaries payable increase 24,000 Net income $24,000 Required: Prepare the operating activities section of the statement of cash flows for Hampton Company using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) Cash flows from operating activities Net income Depreciation expense Inventory decrease Salaries payable increase Accounts receivable increase Net cash provided by operating activities 0

Solution

Solution: Cash flows from operating activities Net income 24,000 Depreciation 12,000 Accounts receivable increase -10,000 Inventory decrease 16,000 Salaries payable increase 1,000 Net cash provided by operating activities 43,000 Working Notes: Net income cash provided by operation before adjustment so 1st added. Depreciation is non cash expenses , so added back . Accounts receivable increase means cash is trap in accounts receivables so deducted Inventory decrease , shows inventory is converted into cash so added. Salaries payable increases shows cash is not paid , which increases level of cash so added Please feel free to ask if anything about above solution in comment section of the question.