Question

Macrosoft Company reports net income of $61,000. The accounting records reveal depreciation expense of $76,000 as well as increases in prepaid rent, accounts payable, and income tax payable of $56,000, $11,000, and $16,000, respectively. Prepare the operating activities section of Macrosoft's statement of cash flows using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Answer:

Cashflow from Operating Activities                  $

Net income                                                         61,000

Add: items not involving movement of cash

Depreciation                                                    76,000

                                                                          137,000

Changes in working capital:

Increase in prepaid rent                                   (56,000)

Increase in accounts payable                           11,000

                                                                            92,000

Less: Tax                                                            16,000

Cashflow from operating activities                   76,000

Explanation:

Cashflow from operaing activities  using the indirect method equals net income plus depreciation minus increase in prepaid rent plus increase in accounts payable minus tax.