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Software Distributors reports net income of $65,000. Included in that number is depreciation expense of $15,000 and a loss on the sale of land of $6,000. A comparison of this year’s and last year’s balance sheets reveals a decrease in accounts receivable of $28,000, a decrease in inventory of $37,000, and an increase in accounts payable of $45,000. Required: Prepare the operating activities section of the statement of cash flows using the indirect method. Do you see a pattern in Software Distributors’ adjustments to net income to arrive at operating cash flows? What might this imply?

Software Distributors reports net income of $65,000. Included in that number is depreciation expense of $15,000 and a loss on the sale of land of $6,000. A comparison of this year’s and last year’s balance sheets reveals a decrease in accounts receivable of $28,000, a decrease in inventory of $37,000, and an increase in accounts payable of $45,000. Required: Prepare the operating activities section of the statement of cash flows using the indirect method. Do you see a pattern in Software Distributors’ adjustments to net income to arrive at operating cash flows? What might this imply?

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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Software Distributors reports net income of $65,000. Included in that number is depreciation expense of $15,000 and a loss on the sale of land of $6,000. A comparison of this year’s and last year’s balance sheets reveals a decrease in accounts receivable of $28,000, a decrease in inventory of $37,000, and an increase in accounts payable of $45,000.

Required:
Prepare the operating activities section of the statement of cash flows using the indirect method. Do you see a pattern in Software Distributors’ adjustments to net income to arrive at operating cash flows? What might this imply?

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