Question

Selected Balance Sheet Data December 31 2021 2020 Increase (I) or Decrease (D) Cash $ 99,000 $ 83,500 $ 15,500 (I) Accounts receivable 46,300 50,500 4,200 (D) Inventory 72,000 53,500 18,500 (I) Prepaid rent 2,700 4,400 1,700 (D) Accounts payable 42,000 35,500 6,500 (I) Income tax payable 4,700 8,500 3,800 (D) Required: Prepare the operating activities section of the statement of cash flows for Peach Computer using the indirect method.

Answer 1

Answer:

Peach Computer

Cash flow from Operating Activities

Net Income                                                                    $ 0

Adjustment for Changes in Working Capital :

Decreases in  Accounts receivable                           $4,200

Increases in Inventory                                              ($18,500)

Decrease in Prepaid Rent                                           $1,700

Increases in Accounts payable                                  $6,500

Decrease in  Income tax payable                             ($3,800)

Net Cash used by Operating Activities                    ($9,900)

Explanation:

The Indirect method reconciles the Net Income to Operating Cashflow by adjusting for changes in working capital and non -cash items previously included in net income.