Skysong, Inc. reported net income of $196,870 for 2017. Skysong, Inc. also reported depreciation expense of $36,940 and a loss o

Question

4 years ago

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Skysong, Inc. reported net income of $196,870 for 2017. Skysong, Inc. also reported depreciation expense of $36,940 and a loss o

f $4,720 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $13,760 for the year, a $16,070 increase in accounts payable, and a $4,250 increase in prepaid expenses. Prepare the operating activities section of the statement of cash flows for 2017. Use the indirect method.

Business

1 answer:

Brilliant_brown [7] · Answer 1 · 2021-12-07T10:08:18+03:00

Answer:

2017 Cashflows from operations Skysong, Inc.

Amount in Dollars

Net earnings 196,870.00

<u>Additions to cash</u>

Depreciation 36,940.00

Loss on asset disposal 4,720.00

Increase in accounts receivable (13,760.00)

Increase in accounts payable 16,070.00

Increase in prepaid expenses (4,250.00)

Net cash flows from operating activities 236,590.00

Explanation:

Using the Indirect method, Depreciation as a non cash item is added back to the net income. An increase in an asset is an outflow of cash while an increase in a liability is treated as an inflow of cash. Hence, operating activities section of the statement of cash flows for 2017 is as shown below;