Question

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: End Beginning Cash $50,000 $60,000 Accounts receivable 112,000 108,000 Inventories 105,000 93,000 Prepaid expenses 4,500 6,500 Accounts payable (merchandise creditors) 75,000 89,000 What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method

Answer 1

Answer:

$296000

Explanation:

Cash flows from operating activities

Net income $275,000

Adjustments to reconcile net income to net

Cash provided by operating activities

Depreciation expense $40,000

Amortization of patents $9,000

Increase in Accounts receivable ($4,000)

Increase in Inventories ($12,000)

Decrease in Prepaid expenses $2,000

Decrease in Accounts payable ($14,000)

Net cash provided by operating activities $296,000

Answer 2

The amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method is $296,000.

• The calculation is as follows:

Cash flows from operating activities

Net income $275,000

Adjustments to reconcile net income to net

Cash provided by operating activities

Depreciation expense $40,000

Amortization of patents $9,000

Increase in Accounts receivable ($4,000)

Increase in Inventories ($12,000)

Decrease in Prepaid expenses $2,000

Decrease in Accounts payable ($14,000)

Net cash provided by operating activities $296,000

Therefore we can conclude that The amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method is $296,000.

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