Answered: Prepare the “Cash flows from operating…

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 net income reported on the income statement for the current year was $136,700. Depreciation recorded on store equipment for the year amounted to $22,600. 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	$54,000		$49,140
Accounts receivable (net)	38,720		36,310
Inventories	52,870		55,280
Prepaid expenses	5,940		4,670
Accounts payable (merchandise creditors)	50,600		46,490
Wages payable	27,650		30,370

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:
Net income	$fill in the blank b0d74603ef9cfe2_2
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation	fill in the blank b0d74603ef9cfe2_4
Changes in current operating assets and liabilities:
Increase in accounts receivable	fill in the blank b0d74603ef9cfe2_6
Decrease in inventories	fill in the blank b0d74603ef9cfe2_8
Increase in prepaid expenses
Increase in accounts payable
Decrease in wages payable
Net cash flow from operating activities

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