The net income reported on the income statement for the current year was $146,70

Question

The net income reported on the income statement for the current year was $146,700. Depreciation recorded on store equipment for the year amounted to $24,200. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

a. 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.

b. Cash flows from operating activities differs from net income because it does not use the of accounting. For example revenues are recorded on the income statement when .

End of Year Beginning of Year Cash $58,390 $53,130 Accounts receivable (net) 41,870 39,260 Inventories 57,160 59,770 Prepaid expenses 6,420 5,050 Accounts payable (merchandise creditors) 54,710 50,260 Wages payable 29,900 32,830

Explanation / Answer

Cash flows from Operating activities: Net Income for the year 146700 Adjustment required Depreciation 24200 Changes in current operating assets and liabilities Increase in Accounts receivable -2610 Decrease in Inventory 2610 Increase in Prepaid expense -1370 Increase in Accounts payable 3910 Decrease in Wages payable -2930 Net cash provided from Operating activities 170510 Req b: For example, revenues are recorded in the income statement when earned (i.e. services has been performed). However, it is recorded in cash flow statement, when it is actually received.

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