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Louniana College > The ? secure ? https/ www.lacolleg online.com/ camp/defaultasps?SectionID: 1658 tat d157e/unity7/Complete . Question #1 H Save Ausignmen Submitted O 7 Ex 13-6 Cash flows from operating activities-indired method Objective 1.2 statement for the curent yoar was 5 185,000 pciorded on oquijoment and a building amountod to 39600 for th year Baiances 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 Accounts receivable (net) Inventories Prepaid expenses Accounts payable (merchandise creditors) 91,500 Salaries payable 5 75,900 84,550 186.200 3,600 S 86,150 0,000 175,000 4,500 110,000 4,000 7,200 ? Prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method B If the dred method had een used, would the net cash flow from operating activities have been the same? Explain Upload File No files uploaded for this question

Explanation / Answer

Requirement A Statement of Cash flows Year Ended (Indirect Method) Cash flows from Operating activities: Net income 1,85,000 Adjustments to reconcile net income to net cash from operating activities : Depreciation    96,000 Decrease in Accounts Receivable      5,450 Increase in Inventories -11,200 Decrease in Prepaid Expenses          900 Decrease in Accounts Payable -18,500 Increase in Salary payable      3,200      75,850 Net cash flow from operating activities 2,60,850 Requirement B Yes, Net Cash flow from operating activities calculated using direct and indirect method are same. In direct Method, Cash outflows and inflows directly considered like cash receipts from accounts receciables and cash disbursement to Accounts payable which are relating to Operating activities, then Net of cash out flows and inflows will become Net cash generated /Used from operating activities. In Indirect method, net cash provided or used by operating activities is determined by adding back or deducting from net income those items that do not effect on cash. This method also called as reconciliation method.

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