Cash Flows from Operating Activities—Indirect Method The income statement disclosed the following items for the year: Depreciation expense $41,500 Gain on disposal of equipment 24,210 Net income 333,400 The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable $6,460 Inventory (3,680) Prepaid insurance (1,380) Accounts payable (4,380) Income taxes payable 1,380 Dividends payable 970 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) For the year ended Dec. 31, -- Cash flows from operating activities: $fill in the blank 097d5805b023ff8_2 Adjustments to reconcile net income to net cash flow from operating activities: fill in the blank 097d5805b023ff8_4 fill in the blank 097d5805b023ff8_6 Changes in current operating assets and liabilities: fill in the blank 097d5805b023ff8_8 fill in the blank 097d5805b023ff8_10 fill in the blank 097d5805b023ff8_12 fill in the blank 097d5805b023ff8_14 fill in the blank 097d5805b023ff8_16 Net cash flow from operating activities $fill in the blank 097d5805b023ff8_17 b. Why is net cash flows from operating activities different than net income? Cash flows from operating activities is based on of accounting, whereas net income is computed using of accounting.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cash Flows from Operating Activities—Indirect Method

The income statement disclosed the following items for the year:

Depreciation expense	$41,500
Gain on disposal of equipment	24,210
Net income	333,400

The changes in the current asset and liability accounts for the year are as follows:

	Increase (Decrease)
Accounts receivable	$6,460
Inventory	(3,680)
Prepaid insurance	(1,380)
Accounts payable	(4,380)
Income taxes payable	1,380
Dividends payable	970

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)
For the year ended Dec. 31, --
Cash flows from operating activities:
	$fill in the blank 097d5805b023ff8_2
Adjustments to reconcile net income to net cash flow from operating activities:
	fill in the blank 097d5805b023ff8_4
	fill in the blank 097d5805b023ff8_6
Changes in current operating assets and liabilities:
	fill in the blank 097d5805b023ff8_8
	fill in the blank 097d5805b023ff8_10
	fill in the blank 097d5805b023ff8_12
	fill in the blank 097d5805b023ff8_14
	fill in the blank 097d5805b023ff8_16
Net cash flow from operating activities		$fill in the blank 097d5805b023ff8_17

b. Why is net cash flows from operating activities different than net income?

Cash flows from operating activities is based on of accounting, whereas net income is computed using of accounting.

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