Question

Alfonza Incorporated presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from the company’s 2017 and 2016 yearend balance sheets:
Account Title 2017 2016
Accounts receivable $ 15,000 $ 20,000
Accounts payable 8,750 9,200
The 2017 income statement showed net income of $25,400.
Required
Prepare the operating activities section of the statement of cash flows. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

Explanation:

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

Cash flow from Operating activities - Indirect method

Net income $25,400

Adjustment made:

Add: Decrease in accounts receivable $5,000 ($20,000 - $15,000)

Less: Decrease in accounts payable -$450 ($8,750 - $9,200)

Total of Adjustments $4,550

Net Cash flow from Operating activities            $29,950