Question

The net income reported on the income statement for the current year was $73,600. Depreciation recorded on store equipment for the year amounted to $27,400. 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 $23,500 $18,700
Accounts receivable (net) 56,000 48,000
Merchandise inventory 35,500 40,000
Prepaid expenses 4,750 7,000
Accounts payable (merchandise creditors) 21,800 16,800
Wages payable 4,900 5,800
Required:
A.Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
B. Briefly explain why net cash flow from operating activities is different than net income.
Amount Descriptions
Amortization of intangible assets Decrease in accounts payable Decrease in accounts receivable Decrease in merchandise inventory Decrease in prepaid expenses Decrease in wages payable Depreciation Increase in accounts payable Increase in accounts receivable Increase in merchandise inventory Increase in prepaid expenses Increase in wages payable Net cash flow from operating activities Net cash flow used for operating activities Net income Net loss
A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
Statement of Cash Flows (partial)
1
Cash flows from operating activities:
2
3
Adjustments to reconcile net income to net cash flow from operating activities:
4
5
Changes in current operating assets and liabilities:
6
7
8
9
10
11

Answer 1

Cash Flows from Operating Activities

Adjusted cash flow of $101,000

Working capital adjustments:

Accounts receivable                (8,000)

Inventory                                   4,500

Prepaid expenses                    2,250

Accounts payable                    5,000

Wages payable                          (900)

Net cash from operations $103,850.

The methodology used to determine each metric is what causes the difference between net cash flow from operational activities and net income. The net income is determined using the accrual basis, which accounts for all revenue and expenses regardless of whether there is any cash movement. The net cash flow from operational activities is computed using the cash basis.

What is income?

• Income, which is typically stated in monetary terms, is the spending and saving opportunity acquired by an entity within a given duration.
• Conceptually, income is hard to define, and different fields may have distinct definitions.
• Haig-Simons income, which defines income as Consumption + Change in Net Worth and is commonly applied in economics, is a very significant definition of income.

Learn more about income here:

brainly.com/question/14732695

#SPJ4