The Potter Company reported net income of 225,000 for the current year. Deprecia

Question

The Potter Company reported net income of 225,000 for the current year. Depreciation recorded on buildings and equipment amounted to 74,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

End of year Beginning of year

Cash $20,000 $15,000

Accounts recievable $19,000 $32,000

Inventories $50,000 $65,000

Prepaid expenses $7,000 $5,000

Accounts payable $12,000 $18,000

Income taxes payable $1600 $1200

prepare the cash flows from operating activities section of the statement of cash flows using indirect method

Explanation / Answer

Statement of cash flows (indirect method) Cash flows from operating activities Net income 225,000 adjustments to net income depreciation 74,000 Decrease in accounts receivable 13,000 Decrease in inventory 15,000 Increase in prepaid expenses -2,000 Decrease in Accounts payable -6,000 Increase in income taxes payable 400 net cash provided by operating activities 319,400

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