Curwen Inc. reported net cash flow from operating activities of $216,400 on its statement of cash flows for the year ended December 31. The following information was reported in the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method: Decrease in income taxes payable $4,200 Decrease in inventories 10,400 Depreciation 16,000 Gain on sale of investments 7,200 Increase in accounts payable 2,900 Increase in prepaid expenses 1,800 Increase in accounts receivable 7,800 a. Determine the net income reported by Curwen Inc. for the year ended December 31. $fill in the blank 1 b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference? Because depreciation expense which has no effect on cash flows from operating activities. Changes in current operating assets and liabilities that are added or deducted. Changes in fixed assets and liabilities that are added or deducted. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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termining Net Income from Net Cash Flow from Operating Activities

Curwen Inc. reported net cash flow from operating activities of $216,400 on its statement of cash flows for the year ended December 31. The following information was reported in the “Cash flows from operating activities” section of the statement of cash flows, using the indirect method:

Decrease in income taxes payable $4,200
Decrease in inventories 10,400
Depreciation 16,000
Gain on sale of investments 7,200
Increase in accounts payable 2,900
Increase in prepaid expenses 1,800
Increase in accounts receivable 7,800

a. Determine the net income reported by Curwen Inc. for the year ended December 31.
$fill in the blank 1

b. Curwen’s net income is different than net cash flow from operating activities. Which of the following could possibly be the reason for such difference?

  1. Because depreciation expense which has no effect on cash flows from operating activities.
  2. Changes in current operating assets and liabilities that are added or deducted.
  3. Changes in fixed assets and liabilities that are added or deducted.
  4. Gain from sales of investment is included in net income while the sales proceeds are added in operating activities of cash flow statements.
 

 

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