The net income reported on the income statement for the current year was $318,70
ID: 2342696 • Letter: T
Question
The net income reported on the income statement for the current year was $318,700. Depreciation recorded on equipment and a building amounted to $93,980 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
Required:
If the direct method had been used, would the net cash flow from operating activities have been the same?
Net loss
A. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required.
Score: 54/77
Statement of Cash Flows (partial)
1
Cash flows from operating activities:
2
3
Adjustments to reconcile net income to net cash flow from operating activities:
4
5
Changes in current operating assets and liabilities:
6
7
8
9
10
11
End of Year Beginning of Year Cash $90,370 $95,280 Accounts receivable (net) 111,660 118,570 Inventories 232,780 203,250 Prepaid expenses 12,000 15,310 Accounts payable (merchandise creditors) 96,420 104,940 Salaries payable 15,310 13,420Explanation / Answer
Answer:
1
Statement of Cash Flows (partial)
Indirect method
Amount $
Amount $
Cash flows from operating activities:
Net income
318700
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
93980
Changes in current operating assets and liabilities:
Decrease in Accounts receivable (118570-111660)
6910
Increase in Inventories (232780-203250)
-29530
Decrease in Prepaid expenses (15310-12000)
3310
Decrease in Accounts payable (96420-104940)
-8520
Increase in Salaries payable (15310-13420)
1890
Net Changes
68040
Net Cash flows from operating activities
386740
2
If the direct method had been used, would the net cash flow from operating activities have been the same?
Answer: Yes
Statement of Cash Flows (partial)
Indirect method
Amount $
Amount $
Cash flows from operating activities:
Net income
318700
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
93980
Changes in current operating assets and liabilities:
Decrease in Accounts receivable (118570-111660)
6910
Increase in Inventories (232780-203250)
-29530
Decrease in Prepaid expenses (15310-12000)
3310
Decrease in Accounts payable (96420-104940)
-8520
Increase in Salaries payable (15310-13420)
1890
Net Changes
68040
Net Cash flows from operating activities
386740
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