1.A company starts the year with accounts payable of $13,000 but ends the year w
ID: 2419327 • Letter: 1
Question
1.A company starts the year with accounts payable of $13,000 but ends the year with the balance being $19,000. Net income for the year is $300,000. If the company reports its cash flows from operating activities by means of the indirect method, what amount should be reported?
2.The Hamrick Company owns several pieces of real estate and holds insurance policies to cover them against harm. The company recognized insurance expense of $51,000 on its current income statement. In addition, the company had a Prepaid Insurance account on several of these policies with the reported value dropping by $5,000 during the period. Finally, an Insurance Payable reported on the balance sheet has a reported value that rose from $35,000 at the beginning of the period to $42,000 by year's end. How much cash did Hamrick pay this year on its various insurance policies?
Explanation / Answer
Cash flow from operating activities = net profit as per profit and loss account + Increase in current liability
= 300000+( 19000-13000) i.e 306000
2) Cash paid for insurance policies = 51000-35000+42000 i.e 58000
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