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enyata [817]
2 years ago
13

Gutierrez Company reported net income of $225,000 for 2017. Gutierrez also reported depreciation expense of $45,000 and a loss o

f $5,000 on the disposal of equipment. The comparative balance sheet shows a decrease in accounts receivable of $15,000 for the year, a $17,000 increase in accounts payable, and a $4,000 decrease in prepaid expenses.
Instructions

Prepare the operating activities section of the statement of cash flows for 2017. Use the indirect method.

Prepare the operating activities section—indirect method.
Business
1 answer:
Anestetic [448]2 years ago
4 0

Answer:

                        Gutierrez Company

                       Cash Flow statement

                          for the year 2017

                                                                     $

Net Income                                              225,000                

+ Depreciation                                            45,000

+ Decrease in receivable                           15,000

+ Increase in payable                                  17,000

+ Decrease in prepaid expenses            <u>  4,000 </u>

Net cash flow from operating activities  <u>306,000</u>  

Explanation:

Depreciation is an non cash expense so it will be added to the net profit for the calculation of cash flow from operating activities. Decrease in receivable, Increase in payable  and decrease in prepaid expenses result in the inflow of cash. So, they are all added in the operating income value.

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 Regardless if the amount of supplies has not been paid or not, it is still accounted for in the balance sheet. You would have a debit of 342,000 for supplies, credit of supplies payable of 240,000 and a credit to cash for 102,000 assuming that the difference between both amounts was paid for with cash.


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<h3>The journal entries </h3>

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(Being the goods sold on credit basis is recorded)

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