Question

The income statement disclosed the following items for the year: Depreciation expense $ 57,600 Gain on disposal of equipment 33,600 Net income 508,000 SHOW ME HOW Net cash flow from operating activities, $103,850 SHOW ME HOW Net cash flow from operating activities, $260,850 Net cash flow from operating activities, $525,410 SHOW ME HOW Chapter 13 Statement of Cash Flows 643 (Continued) Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 The changes in the current asset and liability accounts for the year are as follows: Increase (Decrease) Accounts receivable $ 8,960 Inventory (5,120) Prepaid insurance (1,920) Accounts payable (6,080) Income taxes payable 1,410 Dividends payable 2,200 A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method

Answer 1

Answer:

Explanation:

The preparation of the Cash Flows from Operating Activities—Indirect Method is shown below:

Cash flow from Operating activities - Indirect method

Net income                                                                                  $508,000

Adjustment made:

Add : Depreciation expense $57,600

Less: Gain on disposal of equipment ($33,600)

Less: increase in accounts receivable ($8,960)

Add: Decrease in inventory $5,120

Add: Decrease in prepaid insurance $1,920

Less: Decrease in accounts payable ($6,080)

Add: Increase in income tax payable $1,410

Net Cash flow from Operating activities                                $525,410