Balances of the current asset and current liability accounts at the end of the t
ID: 2396761 • Letter: B
Question
Balances of the current asset and current liability accounts at the end of the this year and the prior year are listed below. Prepare the Cash Flow from Operating Activities section of a Statement of Cash Flows using the indirect method. Inc. (Dec.) Prior Year $240,000 $250,000 24,00068,000 This Year Cash Accounts Receivable (net) Prepaid Insurance Inventories Accounts Payable Cash Dividends Payable Taxes Payable 22,500 53,000 2,400 1,200 33,000 31,000 7,500 4,100 10,000 5,000 NET INCOME reported for the current year on the income statement was $27,000 DEPRECIATION recorded on fixed assets for the year was $18,000 Cash Flow From Operating Activities 27,000 Net Income, per income statement Adjustments to reconcile Net Income to Net Cash from Operating Activities Changes in current operating assets and liabilities: Net Cash Flow From Operating ActivitiesExplanation / Answer
a. This Year Prior Year Inc. (Dec.) Cash $ 2,40,000 $ 2,50,000 $ -10,000 Accounts Receivable $ 24,000 $ 22,500 $ 1,500 Prepaid Insurance $ 53,000 $ 68,000 $ -15,000 Inventories $ 1,200 $ 2,400 $ -1,200 Accounts Payable $ 31,000 $ 33,000 $ -2,000 Cash dividend Payable $ 7,500 $ 10,000 $ -2,500 Taxes Payable $ 4,100 $ 5,000 $ -900 b. Cash flow from operating Activities: Net Income, per income statement $ 27,000 Adjustments to reconcile net income to Net cash from operating activites Depreciation Expenses 18,000 Changes in current assets and current liabilities: Increase in Accouts receivable -1,500 Decrease in Prepaid insurance 15,000 Decrease in Inventories 1,200 Decrease in accounts payable -2,000 Decrease in Taxes Payable -900 Net Cash flow from operating activties 56,800 Notes:Cash dividend is part of financing activities.
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