Prepare the operating activities section—indirect method . (LO 4), AP The income
ID: 2481305 • Letter: P
Question
Prepare the operating activities section—indirect method.
(LO 4), AP
The income statement of Paxson Company is presented here.
PAXSON COMPANY
Income Statement
For the Year Ended November 30, 2014
Beginning inventory
Purchases
4,400,000
Goods available for sale
Ending inventory
1,600,000
4,700,000
Selling expenses
Administrative expenses
700,000
1,150,000
$1,750,000
Additional information:
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Instructions
Prepare the operating activities section of the statement of cash flows for the year ended November 30, 2014, for Paxson Company, using the indirect method.
Net cash provided $1,940,000
PAXSON COMPANY
Income Statement
For the Year Ended November 30, 2014
Sales revenue $7,600,000 Cost of goods soldBeginning inventory
$1,900,000Purchases
4,400,000
Goods available for sale
6,300,000Ending inventory
1,600,000
Total cost of goods sold4,700,000
Gross profit 2,900,000 Operating expensesSelling expenses
450,000Administrative expenses
700,000
1,150,000
Net income$1,750,000
Explanation / Answer
Answer:
Cash Flow Statement Cash flow from operating activities Net income 1750000 Add Non Cash items: Depreciation expense 110000 Net Income after adjustment from non cash items 1860000 Add: Decrease in Inventory 300000 Decrease in Accounts Receivable 380000 Less: Increase in prepaid expenses 150000 Dec in accounts payable 350000 Dec in accrued expenses 100000 Net Cash Provided from Operations 1940000