the cash flow from operating activities section of the statement of cash flows,

Question

the cash flow from operating activities section of the statement of cash flows, using direct method.

The net income reported on the income statement for year was asset and current liabilities accounts at the beginning and end of the year the current year was $210,000. Depredation recorded on equipment and a building amount to $62,500 for the year Balances of the current are as f End of Year $56,000 71,000 140,000 7,800 62,600 Beginning of Year Cash $59,500 73,400 126,S00 8,40D 66,400 8,250 Accounts receivable (net) Prepaid expenses Accounts payable (merchandise creditors) Salaries payable 9,000 Required: 1. Prepare the cash flows from operating activities section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments Operating Actuties Section Cash fows from operating actvities: Adjustments to reconcle net income to net cash fow from operating actvries:

Explanation / Answer

Solution 1:

Solution 2:

Yes, If direct method had been used, net cash flow from operating activities have been same.

Note: Operating activities section of cash flow by direct method cannot be prepared until we have complete income statement,

Operating activities section Particulars Details Amount Cash Flow from Operating Activities: Net Income $210,000.00 Adjustments to reconcile net income to cash flow from operating activities: Depreciation $62,500.00 Change in current operating assets and liabilities: Decrease in Accounts Receivables ($73400 - $71000) $2,400.00 Increase in Inventory ($140000 - $126500) -$13,500.00 Decrease in prepaid expenses ($8,400 - $7,800) $600.00 Decrease in Accounts payable ($66400 - $62600) -$3,800.00 Increase in Salaries payable ($9,000 - $8,250) $750.00 Net Cash Flow From Operating Activites $258,950.00

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