Question

The current sections of Sandhill Co.'s balance sheets at December 31, 2021 and 2022, are presented here. Sandhill Co's net income for 2022 was $137,700. Depreciation expense was $24,300. 2022 2021 Current assets $89,100 Cash $94,500 Accounts receivable 72,000 80,100 151,200 Inventory 154,800 Prepaid expenses 24,300 19.800 $342000 $343,800 Total current assets Current liabilities Accrued expenses payable $13,500 $4,500 Accounts payable 76,500 82800 $90,000 Total current liabilities $87.300
Prepare the net cash provided (used) by operating activities section of the company's statement of cash flows for the year ended December 31, 2022, using the indirect method.

Answer 1

Answer and Explanation:

The prepartion of the net cash provided or used by operating activities section of the cash flow statement is presented below:

Cash flows from operating activities

Net income  $137,700

Adjustments made  

Depreciation expense $24,300  

Add: Decrease in Accounts receivable $8,100 ($72,000 - $80,100)  

Add: Decrease in inventory $3,600  ($151,200 - $154,800)  

Less: Increase in Prepaid expenses -$4,500 ($24,300 - $19,800)  

Add: Increase in accrued expenses payable $9,000 ($13,500 - $4,500)  

Less: Decrease in accounts payable -$6,300 ($76,500 - $82,800)  

Total of adjustments                                              $34,200

Net cash provided by operating activities  $171,900

The negative sign represents cash outflow and positive sign represents cash inflow