Preparing the Operating Activities Section The data below were provided by the accounting records of Franklin Company. Net income (accrual basis) $104,000 Depreciation expense 20,800 Decrease in salaries payable 3,120 Decrease in trade accounts receivable 4,680 Increase in merchandise inventory 6,500 Amortization of patent 260 Increase in long-term liabilities 26,000 Sale of capital stock for cash 65,000 Amortization of premium on bonds payable 520 Accounts payable increase 10,400 Stock dividend issued 26,000 Required Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method). Note: If an item is not included in the operating activities section, leave the answer blank (zero). Cash flows from Operating Activities Net income Answer Adjustments: Depreciation expense Answer Amortization expense—patent Answer Amortization of premium on bonds payable Answer Decrease in accounts receivable Answer Increase in merchandise inventory Answer Increase in accounts payable Answer Increase in long-term liabilities Answer Decrease in salaries payable Answer Sale of capital stock for cash Answer Stock dividend issued Answer Net cash provided (used) by operating activities Answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Preparing the Operating Activities Section

The data below were provided by the accounting records of Franklin Company.

Net income (accrual basis)	$104,000
Depreciation expense	20,800
Decrease in salaries payable	3,120
Decrease in trade accounts receivable	4,680
Increase in merchandise inventory	6,500
Amortization of patent	260
Increase in long-term liabilities	26,000
Sale of capital stock for cash	65,000
Amortization of premium on bonds payable	520
Accounts payable increase	10,400
Stock dividend issued	26,000

Required

Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method).

Note: If an item is not included in the operating activities section, leave the answer blank (zero).

Cash flows from Operating Activities
Net income	Answer
Adjustments:
Depreciation expense	Answer
Amortization expense—patent	Answer
Amortization of premium on bonds payable	Answer
Decrease in accounts receivable	Answer
Increase in merchandise inventory	Answer
Increase in accounts payable	Answer
Increase in long-term liabilities	Answer
Decrease in salaries payable	Answer
Sale of capital stock for cash	Answer
Stock dividend issued	Answer
Net cash provided (used) by operating activities	Answer

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