Question

The current sections of Buffalo Corp.’s balance sheets at December 31, 2016 and 2017, are presented here. Buffalo Corp.’s net income for 2017 was $155,448. Depreciation expense was $27,432. 2017 2016 Current assets Cash $106,680 $ 100,584 Accounts receivable 81,280 90,424 Inventory 170,688 174,752 Prepaid expenses 27,432 22,352 Total current assets $386,080 $388,112 Current liabilities Accrued expenses payable $ 15,240 $ 5,080 Accounts payable 86,360 93,472 Total current liabilities $101,600 $ 98,552 Prepare the net cash provided (used) by operating activities section of the company’s statement of cash flows for the year ended December 31, 2017, 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).)

Answer 1

Answer and Explanation:

The preparation of the cash flow from operating activities is presented below:

Cash Flows from Operating Activities  

Net income  $155,448

Adjustments

Add: Depreciation Expense $27,432  

Add: Decrease in Accounts receivable $9,144  (81,280  - 90,424)

Add: Decrease in Inventory $4,064  (170,688 -  174,752)

Less: Increase in Prepaid expenses -$5,080  (27,432 - 22,352)

Add: Increase in Accrued expenses payable $10,160  (15,240 - 5,080)

Less : Decrease in Accounts payable -$7,112   (86,360 - 93,472)

Total of adjustments                      $38,608

Net Cash Provided by Operating Activities  $194,056

The outflow of cash represents in negative sign and the positive sign reflects the inflow of cash