Question

The income statement of Indigo Company is shown below. INDIGO COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue $6,910,000 Cost of goods sold Beginning inventory $1,860,000 Purchases 4,820,000 Goods available for sale 6,680,000 Ending inventory 1,560,000 Cost of goods sold 5,120,000 Gross profit 1,790,000 Operating expenses Selling expenses 450,000 Administrative expenses 710,000 1,160,000 Net income $630,000 Additional information: 1. Accounts receivable decreased $340,000 during the year. 2. Prepaid expenses increased $150,000 during the year. 3. Accounts payable to suppliers of merchandise decreased $250,000 during the year. 4. Accrued expenses payable decreased $130,000 during the year. 5. Administrative expenses include depreciation expense of $60,000. Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2017, for Indigo Company, using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).) INDIGO COMPANY Statement of Cash Flows (Partial) $ Adjustments to reconcile net income to $

Answer 1

Answer:

INDIGO COMPANY

STATEMENT OF CASHFLOWS FOR THE YEAR ENDED DECEMBER 31, 2017

OPERATING ACTIVITIES

Net Income                                              $630,000

Add back :

Depreciation                                             600,000

Changes in working capital

Inventory                              300,000

Account receivable             340,000

Prepaid expenses               (150,000)

Account payable                  (250,000)

Accrued expenses               (130,000)           110,000

Cash provided by operationg activities        1,340,000

             

Explanation: