Answer:
Net income = $320
Net cash flow from Operating activity = $145
Explanation:
The journal entries are shown below:
1. Cash A/c Dr $485
To Service revenue A/c $485
(Being sales service is provided for cash)
2. Salary expense A/c Dr $165
Outstanding salary expense A/c Dr $175
To Salary and wages payable A/c $340
(Being salary expense is recorded)
Salary and wages payable A/c $340
To Cash $340
(Being salary and wages are paid)
The net cash flow from operating activities would be
= Service revenue - salaries and wages payable
= $485 - $340
= $145
The net income would be
= Sales - salary expense
= $485 - $165
= $320
Cash flow from Operating activities under the indirect method
Net income $320
Less: Decrease in salary payable - $175
Net Cash flow from Operating activities $145
