Cash flows from operating activities-indirect methodThe net income reported on the income statement for the current yearwas $93,700. Depreciation recorded on store equipment for the yearamounted to $31,200. Balances of the current asset and current liabilityaccounts at the beginning and end of the year are as follows: End of Year Beginning of Year CashAccounts receivable (net)InventoriesPrepaid expensesAccounts payable (merchandise creditors)Wages payable $24,10065,00047,2003,25023,4005,300 $19,70056,00050,0008,00017,2006,400 a. Prepare the "Cash flows from operating activities" section of thestatement of cash flows, using the indirect methodb. Briefly explain why net cash flow from operating activities isdifferent than net income.
Cash flows from operating activities-indirect methodThe net income reported on the income statement for the current yearwas $93,700. Depreciation recorded on store equipment for the yearamounted to $31,200. Balances of the current asset and current liabilityaccounts at the beginning and end of the year are as follows: End of Year Beginning of Year CashAccounts receivable (net)InventoriesPrepaid expensesAccounts payable (merchandise creditors)Wages payable $24,10065,00047,2003,25023,4005,300 $19,70056,00050,0008,00017,2006,400 a. Prepare the "Cash flows from operating activities" section of thestatement of cash flows, using the indirect methodb. Briefly explain why net cash flow from operating activities isdifferent than net income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The net income reported on the income statement for the current year
was $93,700.
amounted to $31,200. Balances of the current asset and current liabilityaccounts at the beginning and end of the year are as follows:
| End of Year | Beginning of Year | |
| Cash Inventories Prepaid expenses Accounts payable (merchandise creditors) Wages payable |
$24,100 65,000 47,200 3,250 23,400 5,300 |
$19,700 56,000 50,000 8,000 17,200 6,400 |
a. Prepare the "Cash flows from operating activities" section of the
statement of cash flows, using the indirect method
b. Briefly explain why net cash flow from operating activities is
different than net income.
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