Question

The following income statement and information about changes in noncash current assets and current liabilities are reported. SONAD COMPANY Income Statement For Year Ended December 31, 2017 Sales $ 1,828,000 Cost of goods sold 991,000 Gross profit 837,000 Operating expenses Salaries expense $ 245,535 Depreciation expense 44,200 Rent expense 49,600 Amortization expenses–Patents 4,200 Utilities expense 18,125 361,660 475,340 Gain on sale of equipment 6,200 Net income $ 481,540 Changes in current asset and current liability accounts for the year that relate to operations follow. Accounts receivable $ 30,500 increase Accounts payable $ 12,500 decrease Inventory 25,000 increase Salaries payable 3,500 decrease Required: Prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method.

Answer 1

Answer:

Explanation:

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

Cash flow from Operating activities - Indirect method

Net income $481,540

Adjustment made:

Add : Depreciation expense $44,200

Add: Amortization expense $4,200

Less: Gain on sale of equipment - $6,200

Less: Increase in accounts receivable - $30,500

Less: Increase in inventory  - $25,000

Less: Decrease in accounts payable - $12,500

Less: Decrease in salaries payable - $3,500

Net Cash flow from Operating activities                          $452,240