Indirect Method The net income reported on the Income statement for the current

Question

Indirect Method The net income reported on the Income statement for the current year was $210,200. Depreciation recorded on equipment and a building amounted to $62,800 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 $S5,700 $57,930 71,490 23,160 8,170 4,650 8,050 Accounts receivable (net) 139,250 7,740 62,220 8,970 Prepaid expenses Accounts payable (merchandise creditors) Salaries payable a. Prepare the Cash Flows from Operating Activities section of the statement of cash fows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments Cash flows from cperating actvities Next MacBook Air

Explanation / Answer

Cashflows from Operating activities: Net profit for the yeaar 210000 Adjustment required to reconcile Depreciation 62800 Changes in Current operating assets and liabilities Decrease in Accounts receivable 860 Increase in Inventory -16090 Decrease in Prepaid expense 430 Decrease in Accounts payable -2430 Increase in salaries payable 920 Net cash provided from Operating activities 256490 Yes, the cashflows from operating activities will be same, if direct method is used.

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