Palmer Company reported net income of $100,000 for the year 2017. Depreciation r

Question

Palmer Company reported net income of $100,000 for the year 2017. Depreciation recorded on buildings and equipment amounted to $35,000 for the year and the company reported a gain on sale of plant assets of $85,000. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year $20,000 54,000 55,000 3,500 18,000 5,200 Beginning of Year Cash Accounts receivable Inventories Prepaid expenses Accounts payable Income taxes payable $15,000 32,000 65,000 6,000 8,000 1,200 Instructions; Prepare the cash flows from operating activities section of the statement of cash flows for 2017. Use the indirect method. Note: Write clearly and use proper labels [do not abbreviate]. To get full credit, you must write down the appropriate levels for each shown amount.

Explanation / Answer

Cash flow from operating Activities Particulars Amount ($) Net Income        1,00,000 Add/ less : Non Cash expense/ Income Depreciation            35,000 Gain on sale of Plant          (85,000) Cash Profit(A)            50,000 Add: Increase in Current Liabilities & Decrease in Current assets Prepaid Expenses (6000-3500)              2,500 Income Tax payable (5200-1200)              4,000 Inventory (65000-55000)            10,000 Total (B)            16,500 Less: Decrease in Current Liabilities & increase in Current assets Accounts Payable (18000-48000)          (30,000) Account receivable (32000-54000)          (22,000) Total ©          (52,000) Cash flow from operating activities (A+B+C)            14,500

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