Preparing the Operating Activities Section
The following items are relevant to the preparation of a statement of cash flows for Maxwell Inc.
1. Net loss for the year was $48,000. Depreciation expense was $120,000.
2. Wrote off a $9,600 account. During the year, gross accounts receivable increased $240,000, and the allowance for doubtful accounts increased $24,000. All sales of $1,440,000 are on account.
3. Pension expense is $240,000 while funding for the pension plan was $192,000.
4. Deferred tax liability increased $192,000, income taxes payable decreased $48,000, and income tax expense was $528,000.
5. $48,000 of interest was capitalized. Interest expense is $240,000. There is no change in interest payable.
6. Sold short-term investments (not held in a trading account) at a $9,600 gain, proceeds $38,400.
7. Merchandise inventory decreased by $24,000, accounts payable decreased by $12,000, and salaries payable increased by $33,600.
Required
Prepare the reconciliation of net income with cash flow from operations for inclusion in the statement of cash flows (indirect method).
Note: If an item is not included in the operating activities section, leave the answer blank (zero).
Cash flows from Operating Activities Net loss Answer
Adjustments: Depreciation expense Answer
Pension expense Answer
Income tax expense Answer
Capitalized interest Answer
Gain on sale of short-term investments Answer
Increase in accounts receivable Answer
Increase in deferred tax liability Answer
Decrease in income taxes payable Answer
Decrease in merchandise inventory Answer
Decrease in accounts payable Answer
Increase in salaries payable Answer
Net cash provided (used) by operating activities Answer
