I will appreciate if someone can help me with the procediment to find this answe
ID: 2497478 • Letter: I
Question
I will appreciate if someone can help me with the procediment to find this answer
The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:
What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
$198,000
$352,000
$296,000 Correct Answer
$324,000
End Beginning Cash $50,000 $60,000 Accounts receivable 112,000 108,000 Inventories 105,000 93,000 Prepaid expenses 4,500 6,500 Accounts payable (merchandise creditors) 75,000 89,000Explanation / Answer
Solution :
cash flows from operating activities
$
net income
275,000
add
Depreciation
40,000
add
Amortisation
9,000
324,000
Less
Increase in account receivable
4,000
Less
Increase in inventory
12,000
Add
Decrease in prepaid expense
- 2,000
Less
Decrease in account payable
14,000
28,000
cash flows from operating activities
296,000
cash flows from operating activities
$
net income
275,000
add
Depreciation
40,000
add
Amortisation
9,000
324,000
Less
Increase in account receivable
4,000
Less
Increase in inventory
12,000
Add
Decrease in prepaid expense
- 2,000
Less
Decrease in account payable
14,000
28,000
cash flows from operating activities
296,000