The income statement of Stellar Company is shown below. Sales revenue $6,630,000 Cost of goods sold    Beginning inventory $1,840,000    Purchases 4,520,000    Goods available for sale 6,360,000    Ending inventory 1,530,000    Cost of goods sold 4,830,000 Gross profit 1,800,000 Operating expenses    Selling expenses 450,000    Administrative expenses 660,000 1,110,000 Net income $690,000   Additional information: 1.   Accounts receivable decreased $290,000 during the year. 2.   Prepaid expenses increased $180,000 during the year. 3.   Accounts payable to suppliers of merchandise decreased $260,000 during the year. 4.   Accrued expenses payable decreased $120,000 during the year. 5.   Administrative expenses include depreciation expense of $60,000. Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, for Stellar Company, using the indirect method.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The income statement of Stellar Company is shown below.

Sales revenue

$6,630,000

Cost of goods sold

   Beginning inventory

$1,840,000

   Purchases

4,520,000

   Goods available for sale

6,360,000

   Ending inventory

1,530,000

   Cost of goods sold

4,830,000

Gross profit

1,800,000

Operating expenses

   Selling expenses

450,000

   Administrative expenses

660,000

1,110,000

Net income

$690,000

 

Additional information:

1.

 

Accounts receivable decreased $290,000 during the year.

2.

 

Prepaid expenses increased $180,000 during the year.

3.

 

Accounts payable to suppliers of merchandise decreased $260,000 during the year.

4.

 

Accrued expenses payable decreased $120,000 during the year.

5.

 

Administrative expenses include depreciation expense of $60,000.

Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, for Stellar Company, using the indirect method. 

 

Expert Solution
Step 1

Cash flow from operating activities indicates the cash inflow or outflow transactions related to the business operation. It can be prepared using the direct or indirect method. 

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