Question

Exercise 11-8A Calculate operating activities—indirect method (LO11-3) Hardware Suppliers reports net income of $165,000. Included in net income is a gain on the sale of land of $20,000. A comparison of this year’s and last year’s balance sheets reveals an increase in accounts receivable of $35,000, an increase in inventory of $20,000, and a decrease in accounts payable of $55,000. Required: Prepare the operating activities section of the statement of cash flows using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

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 $165,000

Adjustment made:

Less : Gain on the sale of land -$20,000

Less: Increase in accounts receivable -$35,000

Less: Increase in inventory -$20,000

Less: Decrease in accounts payable -$55,000

Total of Adjustments -$130,000

Net Cash flow from Operating activities                               $35,000