1. St. Joe’s Inc. reported a $15,000 net loss for 2008. Below are the increases

ID: 2499242 • Letter: 1

Question

St. Joe’s Inc. reported a $15,000 net loss for 2008. Below are the increases and decreases in selected accounts for 2006:

Accounts Receivable

$10,000 increase

Inventory

2,000 decrease

Prepaid Expense

5,000 decrease

Accounts Payable

3,000 increase

Interest Payable

2,000 decrease

Accumulated Depreciation

8,000 increase

St. Joe’s Inc. had no changes in its plant or equipment.

Required:

Prepare the operating activities section of the statement of cash flows for St. Joe’s Inc. for 2008, using the indirect method.

Explanation / Answer

The operating activities section of the statement of cash flows for St. Joe’s Inc. for 2008, using the indirect method.:-

Net loss

Add:- Provision for depreciation (Accumulated depreciation)

Add:- Decrease in inventory and prepaid expenses ( 2000 + 5000)

Add:- Increase in Accounts payable

Less:- Increase in Accounts receivable

Less:- Decrease in interest payable

(-) 15000

8000

7000

3000

(10000)NOTE 1

(2000)NOTE 2

(NOTE 1 and NOTE 2):- These figures are to be deducted while calculating cash flow from operating activities.

Conclusion:- Cash used in operating activities = 9000

This $ 9000 represents Negative cash flow from operating activities.

Particulars Amount