Explanation Operating Activities Section: The activities which accounts for daily operating transactions results in cash inflows as well as outflows are referred to as the operating activities section. The cash flows in the operating activities exists mainly from the production and distribution of commodities produced in an economy. The cash flow statement as per the indirect method is given below: P Goods, Ltd. Cash Flow Statement – Indirect Method For the year ended December 31 Operating Activities Amount ($) Net Income 10,500 Adjustments to reconcile net income to net cash provided by operating activities: Add: Depreciation Expense 8,000 Changes in operating working capital accounts: Add: Decrease in Accounts Receivable 20,000 Add: Decrease in Inventory 22,300 Less: Increase in Prepaid Rent (8,300) Add: Increase in Accounts Payable 2,000 Less: Decrease in Accrued Expenses (4,500) Less: Decrease in Taxes Payable (1,000) Net cash provided by operating activities 49,000 Table (1) Thus, the net cash from the operating activities turn equals to $49,000. Working Notes: The calculation for Decrease in Accounts Receivable is given below: Decrease in Accounts Receivable = ( Ending balance − Opening Balance) = $ 30 , 000 − $ 50 , 000 = − $ 20 , 000 The calculation for decrease in inventory is given below: Decrease in Inventory = ( Ending balance − Opening Balance) = $ 18 , 900 − $ 41 , 200 = − $ 22

3rd Edition

ISBN: 9780136946533

Author: GORDON

Publisher: PEARSON

See similar textbooks

Concept explainers

Reporting Cash Flows

Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows fro…

Balance Sheet

A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the …

Financial Statements

Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It…

Owner's Capital

Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expect…

Videos

Question

Chapter 22, Problem 22.13BE

To determine

To prepare: The operating activities section of the cash flow statement using the indirect method.

Expert Solution & Answer

Chapter 22 Solutions

INTERMEDIATE ACCOUNTING-MYACCOUNTINGLAB

Ch. 22 - Prob. 22.1Q Ch. 22 - Prob. 22.2Q Ch. 22 - Prob. 22.3Q Ch. 22 - Prob. 22.4Q Ch. 22 - Prob. 22.5Q Ch. 22 - How do firms reclassify gains and losses on the...Ch. 22 - Prob. 22.7Q Ch. 22 - Prob. 22.8Q Ch. 22 - Prob. 22.9Q Ch. 22 - Prob. 22.10Q

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Quickbooks Online Accounting
Accounting
ISBN:9780357391693
Author:Owen
Publisher:Cengage
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub