Question

Plough Company reported net income of $180,000 for the current year. Depreciation recorded on buildings and equipment amounted to $80,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $20,000 $15,000 Accounts receivable 24,000 32,000 Inventory 50,000 65,000 Prepaid expenses 9,500 5,000 Accounts payable 12,000 18,000 Income taxes payable 1,600 1,200 Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect

Answer 1

Answer: $272,900

Explanation:

Net income = $180,000

Net cash flow from operating activities:

= Net income + Depreciation + Decrease in accounts receivables + Decrease in Inventory - Increase in prepaid expenses + Increase in Income Tax payable - Decrease in accounts payable

= $180,000 + $80,000 + $8,000 + $15,000 - $4,500 + $400 - $6,000

= $272,900