Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $142,200. Depreciation recorded on store equipment for the year amounted to $23,500. 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 $54,180 $49,850 Accounts receivable (net) 38,850 36,840 Merchandise inventory 53,040 56,080 Prepaid expenses 5,960 4,740 Accounts payable (merchandise creditors) 50,770 47,160 Wages payable 27,740 30,810 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: $ Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities $ b. Cash flows from operating activities differs from net income because it does not use the of accounting. For example revenues are recorded on the income statement when .

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Cash Flows from Operating Activities—Indirect Method

The net income reported on the income statement for the current year was $142,200. Depreciation recorded on store equipment for the year amounted to $23,500. 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	$54,180		$49,850
Accounts receivable (net)	38,850		36,840
Merchandise inventory	53,040		56,080
Prepaid expenses	5,960		4,740
Accounts payable (merchandise creditors)	50,770		47,160
Wages payable	27,740		30,810

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:
	$
Adjustments to reconcile net income to net cash flow from operating activities:

Changes in current operating assets and liabilities:





Net cash flow from operating activities		$

b. Cash flows from operating activities differs from net income because it does not use the of accounting. For example revenues are recorded on the income statement when .

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