Question

The income statement disclosed the following items for the current year: Depreciation expense $36,000 Gain on disposal of equipment 21,000 Net income 317,500 Balances of the current assets and current liabilities accounts changed between December 31, last year, and December 31, this year, as follows: Increase in accounts receivable $5,600 Decrease in inventory 3,200 Decrease in prepaid insurance 1,200 Decrease in account payable 3,800 Increase in income taxes payable 1,200 Increase in dividends payable 850 Required: Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Answer 1

Answer:

$328,700

Explanation:

The preparation of the Cash Flows from Operating Activities - Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $317,500

Adjustment made:

Add : Depreciation expense $36,000

Less: Gain on disposal of equipment -$21,000

Less: Increase in accounts receivable -$5,600

Add: Decrease in inventory $3,200

Add: Decrease in prepaid insurance $1,200

Less: Decrease in account payable -$3,800

Add: Increase in income taxes payable $1,200

Net Cash flow from Operating activities                   $328,700