Answer:
Prepare the cash flows from operating activities section as follows :
Cash Flows from Operating Activities
Income before tax 172,000
Adjustments of Non- Cash Items :
Gain on sale of building ( 12,000)
Depreciation 127,000
Loss on sale of equipment 11,000
Adjustments of Changes in Working Capital :
Increase in Accounts Receivables (120,000)
Decrease in Inventory 116,000
Decrease in Prepaid insurance 34,000
Increase in Accounts payable 105,000
Increase in Salaries Payable 21,000
Increase in Deferred tax liability 12,000
Decrease in Bond discount (22,000)
Net Cash flow from Operating Activities 444,000
Explanation:
Indirect Method Adjust the Net Income before tax with movements in working capital items and non-cash items included in income statements.
