Question

SONAD COMPANY Income Statement For Year Ended December 31 Sales $ 1,554,000 Cost of goods sold 761,460 Gross profit 792,540 Operating expenses Salaries expense $ 212,898 Depreciation expense 37,296 Rent expense 41,958 Amortization expenses—Patents 4,662 Utilities expense 17,094 313,908 478,632 Gain on sale of equipment 6,216 Net income $ 484,848 Accounts receivable $ 36,750 increase Accounts payable $ 13,850 decrease Inventory 24,550 increase Salaries payable 2,900 decrease Prepare the operating activities section of the statement of cash flows using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer and Explanation:

The preparation of operating activities is given below:-

Statement of Cash Flows

Cash flows from operating activities

Net income                                                 $484,848

Adjustments to reconcile net income to net cash

Income statement items that is not affecting cash  

Depreciation expense                               $37,296

Amortization expense - Patents                $4,662

Less: Gain on sale of equipment                ($6,216)

Changes in current operating assets and liabilities

Less: Increase in accounts receivable       ($36,750)

Less: Increase in inventory                          ($24,550)

Less: Decrease in accounts payable          ($13,850)

Less: Decrease in salaries payable             ($2,900)

Net cash provided by operating activities $442,540