E12-6 Preparing and Evaluating a Simple Statement of Cash Flows (Indirect Method

ID: 2528614 • Letter: E

Question

E12-6 Preparing and Evaluating a Simple Statement of Cash Flows (Indirect Method) [LO 12-2, LO 12-5] Suppose your company reports $180 of net income and $44 of cash dividends paid, and its comparative balance sheet indicates the following Beginning Ending $ 39 Cash Accounts Receivable $229 199 159 95 265 $399 $ 14 Inventory Total $587 Salaries and Wages Payable Common Stock Retained Earnings $ 70 116 401 120 265 Total $399 $587 Required 1. Prepare the operating activities section of the statement of cash flows, using the indirect method (Amounts to be deducted should be indicated with a minus sign.) Net Income Increase in Accounts Receivable Decrease in Inventory Increase in Salaries and Wages Payable Dividends paid Net Cash Flow from Operating Activities$

Explanation / Answer

Net cash flow from Operating Activities = Net income – increase in current assets + decrease in current assets + increase in current liabilities – decrease in current liabilities

Net Income

$ 180

-Increase in Account Receivable

$ 104

+Decrease in Inventory

$ 106

+Increase in Salaries and Wages Payable

$ 56

-Dividend paid

$ 44

Net cash flow from Operating Activities

$ 194