Question

The net income reported on the income statement for the current year was $210,000. Depreciation recorded on equipment and a building amount to $62,500 for the year. Balances of the current asset and current liabilities accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $56,000 $59,500 Accounts receivable (net) 71,000 73,400 Inventories 140,000 126,500 Prepaid expenses 7,800 8,400 Accounts payable (merchandise creditors) 62,600 66,400 Salaries payable 9,000 8,250 Required: Question Content Area a. Prepare the cash flows from operating activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Answer 1

The Cash Flow from Operating Activities 258,950 using the indirect method.

What is Cash Flow from Operating Activities?

The total cash flow generated by a business from its ordinary business operation is known as operating cash flow. It shows if the company is able to generate enough cash inflow to sustain its operation.

The cash flows from operating activities section of the statement of cash flows, using the indirect method is shown below:

                    Particulars                           Amount ($)

               Cash flows from operating activities:

               Net income                                           210,000

Add: Depreciation expense                           62,500

Add: Decrease in accounts receivable           2,400

Less: Increase in inventory                           13,500

Add: Decrease in prepaid expenses            600

Less: Decrease in accounts payable            3,800

Add: Increase in salaries payable                    750

Net cash flow from operating activities           258,950

Hence, Cash Flow from Operating Activities 258,950

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