### Preparation of the Operating Activities Section of the Cash Flow Statement (Indirect Method)The table below illustrates the net adjustments needed to reconcile net income into net cash flow from operating activities, accounting for changes in operating assets and liabilities. This analysis uses figures corresponding to the end and beginning of the respective fiscal period.#### Income and Balance Information- **Net Income for Current Year**: $63,000- **Depreciation on Fixed Assets for the Year**: $24,000#### Current Assets and Liabilities Balances| | **End** | **Beginning** ||----------------------|----------|---------------|| **Cash** | $65,000 | $70,000 || **Accounts Receivable (net)** | $70,000 | $57,000 || **Inventories** | $86,000 | $102,000 || **Prepaid Expenses** | $4,000 | $4,500 || **Accounts Payable (merchandise creditors)** | $51,000 | $58,000 || **Cash Dividends Payable** | $4,500 | $6,500 || **Salaries Payable** | $6,000 | $7,500 |### InstructionsPrepare the operating activities section of the statement of cash flows using the indirect method. Use the minus sign (-) to denote cash outflows, payments, decreases in cash, or any negative adjustments.#### Cash Flows from Operating Activities Section1. **Cash flows from (used for) operating activities**: _________ $2. **Adjustments to reconcile net income to net cash flows from (used for) operating activities**: - Changes in current operating assets and liabilities: - Accounts Receivable: _______ $ - Inventories: _______ $ - Prepaid Expenses: _______ $ - Accounts Payable: _______ $ - Cash Dividends Payable: _______ $ - Salaries Payable: _______ $3. **Net Cash Provided by (Used in) Operating Activities**: _______ $In calculating these cash flows, ensure to incorporate all changes appropriately, reflecting increases and decreases between the beginning and end of the year balances.

Solution: Cash Flows from operating activities section Details Cash Flow from Operating Activities: Net Income $63,000 Adjustments to reconcile net income to cash flow from operating activities: Depreciation ($14800 - $10500) $24,000 Changes in Current operating assets and liabilities: Increase in Accounts Receivables ($5700-70000) -$13,000 Decrease in Inventories ($102000- 86000) $16,000 Decrease in prepaid expenses ($4500- 4000) $500 Decrease In Accounts Payable ($51000-58000) -$7,000 Decrease In Salaries payable ($6000 -7500) -$1,500 Net Cash Flow From Operating Activities $82,000 Net Cash Flow From Operating Activities = 82,000

Business

Accounting

End Beginning Cash $65,000 $70,000 Accounts Receivable (net) 70,000 57,000 Inventories 86,000 102,000 Prepaid Expenses 4,000 4,500 Accounts Payable (merchandise creditors) 51,000 58,000 Cash Dividends Payable 4,500 6,500 Salaries Payable 6,000 7,500 Prepare the operating activities section of the statement of cash flows, using the indirect method. Use ti

End Beginning Cash $65,000 $70,000 Accounts Receivable (net) 70,000 57,000 Inventories 86,000 102,000 Prepaid Expenses 4,000 4,500 Accounts Payable (merchandise creditors) 51,000 58,000 Cash Dividends Payable 4,500 6,500 Salaries Payable 6,000 7,500 Prepare the operating activities section of the statement of cash flows, using the indirect method. Use ti

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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Subject :- Accounting
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