Portions of the financial statements for Horizon Telecom are provided below. Pre
ID: 2534920 • Letter: P
Question
Portions of the financial statements for Horizon Telecom are provided below.
Prepare the operating activities section of the statement of cash flows for Horizon Telecom using the indirect method. (Amounts to be deducted and negative values should be indicated by minus sign.)
HORIZON TELECOM
Income Statement
For the Year Ended December 31, 2018 Revenues $618,000 Expenses: Cost of goods sold $370,000 Operating expenses 110,000 Depreciation expense 33,000 Income tax expense 52,500 Total expenses 565,500 Net Income $ 52,500
Explanation / Answer
Answers
Cash flows from operating activities
Net Income
$ 52,500
Adjustments for noncash effects:
Depreciation expense
$ 33,000
Changes in current assets and current liabilities:
Increase in accounts receivable
$ (5,300)
Increase in inventory
$ (12,500)
Decrease in prepaid rent
$ 9,400
Increase in operating expenses payable
$ 6,600
Decrease in accounts payable
$ (7,200)
Increase in income tax payable
$ 20,200
$ 11,200
Net cash flows operating activities
$ 96,700
Cash flows from operating activities
Net Income
$ 52,500
Adjustments for noncash effects:
Depreciation expense
$ 33,000
Changes in current assets and current liabilities:
Increase in accounts receivable
$ (5,300)
Increase in inventory
$ (12,500)
Decrease in prepaid rent
$ 9,400
Increase in operating expenses payable
$ 6,600
Decrease in accounts payable
$ (7,200)
Increase in income tax payable
$ 20,200
$ 11,200
Net cash flows operating activities
$ 96,700