ash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $131,800. Depreciation recorded on store equipment for the year amounted to $21,700. 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 $51,270 $47,170 Accounts receivable (net) 36,760 34,860 Merchandise inventory 50,190 53,070 Prepaid expenses 5,640 4,480 Accounts payable (merchandise creditors) 48,040 44,620 Wages payable 26,250 29,150 a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Net income $fill in the blank 7e3d0afa507ffb9_2 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation fill in the blank 7e3d0afa507ffb9_4 Changes in current operating assets and liabilities: Increase in accounts receivable fill in the blank 7e3d0afa507ffb9_6 Decrease in merchandise inventory fill in the blank 7e3d0afa507ffb9_8 Increase in prepaid expenses fill in the blank 7e3d0afa507ffb9_10 Decrease in accounts payable fill in the blank 7e3d0afa507ffb9_12 Decrease in prepaid expenses fill in the blank 7e3d0afa507ffb9_14 Net cash flow from operating activities $fill in the blank 7e3d0afa507ffb9_15 b. Cash flows from operating activities differs from net income because it does not use the of accounting. For example revenues are recorded on the income statement when .

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter15: Statement Of Cash Flows

Section: Chapter Questions

Problem 5E: Cash flows from operating activitiesindirect method The net income reported on the income statement...

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Cash Flows from Operating Activities—Indirect Method

The net income reported on the income statement for the current year was $131,800. Depreciation recorded on store equipment for the year amounted to $21,700. 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	$51,270		$47,170
Accounts receivable (net)	36,760		34,860
Merchandise inventory	50,190		53,070
Prepaid expenses	5,640		4,480
Accounts payable (merchandise creditors)	48,040		44,620
Wages payable	26,250		29,150

a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.


Statement of Cash Flows (partial)

Cash flows from operating activities:
Net income	$fill in the blank 7e3d0afa507ffb9_2
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	fill in the blank 7e3d0afa507ffb9_4
Changes in current operating assets and liabilities:
Increase in accounts receivable	fill in the blank 7e3d0afa507ffb9_6
Decrease in merchandise inventory	fill in the blank 7e3d0afa507ffb9_8
Increase in prepaid expenses	fill in the blank 7e3d0afa507ffb9_10
Decrease in accounts payable	fill in the blank 7e3d0afa507ffb9_12
Decrease in prepaid expenses	fill in the blank 7e3d0afa507ffb9_14
Net cash flow from operating activities		$fill in the blank 7e3d0afa507ffb9_15

b. Cash flows from operating activities differs from net income because it does not use the of accounting. For example revenues are recorded on the income statement when .

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