ALLIANCE TECHNOLOGIES Income Statement For the year ended December 31, 2015 Net

Question

ALLIANCE TECHNOLOGIES
Income Statement
For the year ended December 31, 2015   Net sales $ 301,000   Expenses:        Cost of goods sold $181,000        Operating expenses 56,000        Depreciation expense 15,600        Income tax expense 20,000           Total expenses 272,600   Net income $ 28,400 ALLIANCE TECHNOLOGIES Selected Balance Sheet Data December 31, 2015, compared to December 31, 2014   Decrease in accounts receivable $   5,600   Increase in inventory 12,600   Decrease in prepaid rent 8,600   Increase in salaries payable 4,600   Decrease in accounts payable 7,600   Increase in income tax payable 18,400 Prepare the operating activities section of the statement of cash flows for Alliance Technologies using the indirect method. (List cash outflows as negative amounts.)
ALLIANCE TECHNOLOGIES
Income Statement
For the year ended December 31, 2015   Net sales $ 301,000   Expenses:        Cost of goods sold $181,000        Operating expenses 56,000        Depreciation expense 15,600        Income tax expense 20,000           Total expenses 272,600   Net income $ 28,400 ALLIANCE TECHNOLOGIES Selected Balance Sheet Data December 31, 2015, compared to December 31, 2014   Decrease in accounts receivable $   5,600   Increase in inventory 12,600   Decrease in prepaid rent 8,600   Increase in salaries payable 4,600   Decrease in accounts payable 7,600   Increase in income tax payable 18,400 Prepare the operating activities section of the statement of cash flows for Alliance Technologies using the indirect method. (List cash outflows as negative amounts.)

Explanation / Answer

Cash flow from operating activities

A) Net Income                                                           $28,400

B) Add: Non Cash Items                              

    Depreciation Expenses                                         $15,600

c) Changes in Working capital

  Add: Decrease in accounts receivable       $5,600

  Less: Increase in inventory                        $(12,600)

  Add: Decrease in prepaid rent                    $8,600

  Add: Increase in salaries payable               $4,600

  Less: Decrease in accounts payable          $(7,600)

  Add: Increase in income tax payable          $18,400

           Total                                                                  $17,000

So Cash flow from operating activities                         $61,000

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