Question

Additional information:1. Accounts receivable decreased $360,000 during the year.2. Prepaid expenses increased $170,000 during the year.3. Accounts payable to suppliers of merchandise decreased $275,000 during the year.4. Accrued expenses payable decreased $100,000 during the year.5. Administrative expenses include depreciation expense of $60,000.Prepare the operating activities section of the statement of cash flows for the year ended December 31, 2020, for Vince Gill Company, using the indirect method.

Answer 1

Answer and Explanation:

The preparation of cash flows from operating activities is shown below:-

Net Loss                                                                          $1,050,000

Add:

Decrease in accounts receivable         $360,000

Add: Decrease in inventory                   $300,000

Less: Increase in prepaid expenses     ($170,000)

Less: Decrease in accounts payable    ($275,000)

Less: Decrease in accrued expenses

payable                                                    ($100,000)

Add: Depreciation                                   $60,000              $175,000

Cash flows from operating activities                                $1,225,000