Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $149,000. Depreciation recorded on store equipment for the year amounted to $24,600. 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 $58,710 $53,430 Accounts receivable (net) 42,100 39,480 Merchandise inventory 57,480 60,110 Prepaid expenses 6,460 5,080 Accounts payable (merchandise creditors) 55,010 50,540 Wages payable 30,060 33,020 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: $ Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities $ 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 .

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Cash Flows from Operating Activities—Indirect Method

The net income reported on the income statement for the current year was $149,000. Depreciation recorded on store equipment for the year amounted to $24,600. 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	$58,710		$53,430
Accounts receivable (net)	42,100		39,480
Merchandise inventory	57,480		60,110
Prepaid expenses	6,460		5,080
Accounts payable (merchandise creditors)	55,010		50,540
Wages payable	30,060		33,020

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:
	$
Adjustments to reconcile net income to net cash flow from operating activities:

Changes in current operating assets and liabilities:





Net cash flow from operating activities		$

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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