Question

Kresley Co. has provided the following 20X5 current account balances for the preparation of the annual Statement of Cash Flows: January 1 December 31 Accounts receivable $11,500 $14,500 Allowance for uncollectible accounts 400 500 Prepaid rent expense 6,200 4,100 Accounts payable 9,700 11,200 Kresley's 20X5 net income is $75,000. Net cash provided by operating activities in the Statement of Cash Flows should be

Answer 1

Answer:

Net cash provided by operating activities in the Statement of Cash Flows should be $75,700.

Explanation:

Prepare the Cash Flow from Operating Activities Section of the Cash Flow Statement using the Indirect method as follows :

Cash Flow from Operating Activities

Net Income for the year                                                     $75,000

Adjustment for non-cash items :

Increase in Allowance for uncollectible accounts                 $100

Adjustment for changes in working capital :

Increase in Accounts receivable                                       ($3,000)

Decrease in Prepaid rent expense                                     $2,100

Increase in Accounts payable                                             $1,500

Net Cash from Operating Activities                                  $75,700