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EX 16-6 Cash flows from operating activities-indirect method The net income reported on the income statement for the current year was $185,000. Depreciation recorded on equipment and a building amounted to $96,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: OBJ. 1, 2 End of Year Beginning of Year Cash $ 75,000 $ 86,150 Accounts receivable (net) 84,550 90,000 Inventories 186,200 175,000 Prepaid expenses 3,600 4,500 Accounts payable (merchandise creditors) Salaries payable 91,500 110,000 7,200 4,000 a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

EX 16-6 Cash flows from operating activities-indirect method The net income reported on the income statement for the current year was $185,000. Depreciation recorded on equipment and a building amounted to $96,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: OBJ. 1, 2 End of Year Beginning of Year Cash $ 75,000 $ 86,150 Accounts receivable (net) 84,550 90,000 Inventories 186,200 175,000 Prepaid expenses 3,600 4,500 Accounts payable (merchandise creditors) Salaries payable 91,500 110,000 7,200 4,000 a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

FINANCIAL 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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PR. 15-1A and PR. 15-2A

EX. 16-6 and EX. 16-7

EX 16-6 Cash flows from operating activities-indirect method The net income reported on the income statement for the current year was $185,000. Depreciation recorded on equipment and a building amounted to $96,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: OBJ. 1, 2 End of Year Beginning of Year Cash $ 75,000 $ 86,150 Accounts receivable (net) 84,550 90,000 Inventories 186,200 175,000 Prepaid expenses 3,600 4,500 Accounts payable (merchandise creditors) Salaries payable 91,500 110,000 7,200 4,000 a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.
Transcribed Image Text:EX 16-6 Cash flows from operating activities-indirect method The net income reported on the income statement for the current year was $185,000. Depreciation recorded on equipment and a building amounted to $96,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: OBJ. 1, 2 End of Year Beginning of Year Cash $ 75,000 $ 86,150 Accounts receivable (net) 84,550 90,000 Inventories 186,200 175,000 Prepaid expenses 3,600 4,500 Accounts payable (merchandise creditors) Salaries payable 91,500 110,000 7,200 4,000 a. Prepare the Cash flows from operating activities section of the statement of cash flows, using the indirect method. b. If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.
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