Question

Portions of the financial statements for Horizon Telecom are provided below. HORIZON TELECOM Income Statement For the Year Ended December 31, 2018 Revenues $616,000 Expenses: Cost of goods sold $366,000 Operating expenses 118,000 Depreciation expense 25,000 Income tax expense 53,500 Total expenses 562,500 Net Income $ 53,500 HORIZON TELECOM Selected Balance Sheet Data December 31, 2018 Increase in accounts receivable $ 5,300 Increase in inventory 11,300 Decrease in prepaid rent 9,900 Increase in operating expenses payable 5,000 Decrease in accounts payable 7,400 Increase in income tax payable 21,900 Prepare the operating activities section of the statement of cash flows for Horizon Telecom using the indirect method. (Amounts to be deducted and negative values should be indicated by minus sign.)

Answer 1

Answer:

Cash flow from Operating Activities

Net Income                                              $ 53,500

Adjust for Non-Cash items :

Depreciation expense                               25,000

Adjust for Working Capital items :

Increase in accounts receivable            ($ 5,300)

Increase in inventory                               ($11,300)

Decrease in prepaid rent                          $9,900

Increase in operating expenses payable$5,000

Decrease in accounts payable                ($7,400)

Increase in income tax payable             $21,900

Net Cash from Operating Activities        $91,300

Explanation:

Prepare Operating activities section of the statement of cash flows for Horizon Telecom as above.