Question

Kingbird, Inc. reported net income of $195,450 for 2022. Kingbird, Inc. also reported depreciation expense of $33,810 and a loss of $5,040 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $14,650 for the year, a $16,350 increase in accounts payable, and a $4,030 increase in prepaid expenses.
Prepare the operating activities section of the statement of cash flows for 2022. Use the indirect method.

Answer 1

Answer:

$231,970

Explanation:

Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.  

These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income $195,450

Adjustment made:

Add : Depreciation expense $33,810

Add: Loss on the  disposal of plant assets $5,040

Less: Increase in accounts receivable -$14,650

Add: Increase in accounts payable $16,350

Less: Increase in prepaid expenses -$4,030

Total of Adjustments $36,520

Net Cash flow from Operating activities                $231,970