Chapter 14, Problem 36E

During the year, Hepworth Company earned a net income of $61,725. Beginning and ending balances for the year for selected accounts are as follows:

There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows.

Required:

1. 1. Prepare a schedule of operating cash flows using the indirect method.
2. 2. Suppose that all the data are used in Requirement 1 except that the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was $20,475. What is the ending balance of accounts payable?
3. 3. CONCEPTUAL CONNECTION Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs $25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this year’s operating cash flows? If not, what would you suggest be done?