Question

Portions of the financial statements for Alliance Technologies are provided below. ALLIANCE TECHNOLOGIES Income Statement For the year ended December 31, 2021 Net sales $ 335,000 Expenses: Cost of goods sold $ 200,000 Operating expenses 63,000 Depreciation expense 16,300 Income tax expense 23,500 Total expenses 302,800 Net income $ 32,200 ALLIANCE TECHNOLOGIES Selected Balance Sheet Data December 31, 2021, compared to December 31, 2020 Decrease in accounts receivable $ 6,300 Increase in inventory 13,300 Decrease in prepaid rent 9,300 Increase in salaries payable 5,300 Decrease in accounts payable 8,300 Increase in income tax payable 21,200 Required: Prepare the operating activities section of the statement of cash flows for Alliance Technologies using the indirect method. (List cash outflows and any decrease in cash as negative amounts.)

Answer 1

Answer and Explanation:

The preparation of the cash flow from operating activities is presented below:

Cash flow from operating activities

Net income $32,200

Add: Decrease in accounts receivable $ 6,300

Less: Increase in inventory -$13,300

Add: Decrease in prepaid rent $9,300

Add: Increase in salaries payable $5,300

Less: Decrease in accounts payable -$8,300

Add Increase in income tax payable $21,200

Net cash flow provided by operating activities $52,800