Question

The accounting records of EZ Company provided the data below. Net income $ 64,250 Depreciation expense 13,750 Increase in inventory 4,875 Decrease in salaries payable 3,575 Decrease in accounts receivable 6,500 Amortization of patent 1,025 Amortization of premium on bonds 6,925 Increase in accounts payable 10,750 Cash dividends 19,500 Prepare a reconciliation of net income to net cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

Net cash flows from operating activities = $94,750

Explanation:

Net cash flows from operating activities = Net income + Depreciation expense - Increase in inventory - Decrease in salaries payable + Decrease in accounts receivable + Amortization of patent + Amortization of premium on bonds + Increase in accounts payable

=> Net cash flows from operating activities = $64,250 + $13,750 - $4,875 - $3,575 + $6,500 + $1,025 + $6,925 + $10,750

=> Net cash flows from operating activities = $94,750

N.B. Cash Dividends fall under Cash Flow from Financing Activities, that's why it has not been taken in account in Net cash flows from operating activities.