Question

The net income reported on the income statement for the current year was $250,771. Depreciation recorded on fixed assets and amortization of patents for the year were $35,093 and $10,838, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:
End Beginning
Cash: $50,000 $60,000
Accounts receivable: 112,000 108,000
Inventories: 105,000 93,000
Prepaid expenses: 4,500 6,500
Accounts payable-
(merchandise creditors): 75,000 89,000

What is the amount of cash flows, from operating activities, reported on the statement of cash flows, prepared by the indirect method?

Answer 1

Answer:

The amount of cash flows, from operating activities, reported on the statement of cash flows, prepared by the indirect method is $268,702

Explanation:

The Net Income for the year is adjusted for non-cash items, items appearing elsewhere and items in movement of working capital to arrive at the net cash flow from operating activities using the indirect method.

Cash flows, from operating activities

Net income                                                                            $250,771

adjusted for non-cash items

Depreciation                                                                            $35,093

Amortization                                                                             $10,838

adjusted for items in movement of working capital

Increase in Accounts receivable                                            ($4,000)

Increase in Inventories                                                           ($12,000)

Decrease in Prepaid expenses                                                $2,000

Decrease in Accounts payable                                                (14,000)

Net Cash flows, from operating activities                             $268,702