Question

The following income statement and additional year-end information is provided. SONAD COMPANY Income Statement For Year Ended December 31 Sales $ 1,573,000 Cost of goods sold 770,770 Gross profit 802,230 Operating expenses Salaries expense $ 215,501 Depreciation expense 37,752 Rent expense 42,471 Amortization expenses—Patents 4,719 Utilities expense 17,303 317,746 484,484 Gain on sale of equipment 6,292 Net income $ 490,776 Accounts receivable $ 26,500 increase Accounts payable $ 13,075 decrease Inventory 26,775 increase Salaries payable 2,100 decrease Prepare the operating activities section of the statement of cash flows using the indirect method

Answer 1

Answer:

Explanation:

Net Income                                 490776

Add back depreciation                 37752

Add back amortization                    4719

Deduct gain on asset disposal       (6292)

Increase in receivable                     (26500)

Decrease in payable                        (13075)

Increase  in inventory                       (26775)

Increase in salary payable               ( 2100)

Cash flow                                         458,505

The non cash expenses which are depreciation and the amortization cost are added back and non cash income like gain on the disposal of asset deducted to arrive at the net cash flow.