Towson Company prepared the tabulation below at December 31, 2017. Show how each

Question

Towson Company prepared the tabulation below at December 31, 2017.

Show how each item should be reported in the statement of cash flows. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Net Income $340,000 Adjustments to reconcile net income to net cash provided by operating activities:      Depreciation expense $43,000      Increase in accounts receivable $50,000      Decrease in inventory $13,000      Amortization of patent $4,000      Increase in accounts payable $5,600      Decrease in interest receivable $7,000      Increase in prepaid expenses $6,000      Decrease in income taxes payable $1,500      Gain on sale of land $5,000      Net cash provided (used) by operating activities

Explanation / Answer

Cash flows from operating activities Net Income $ 340,000 Adjustments to reconcile net income to : Depreciation expense $   43,000 Amortization of patent $      4,000 Gain on sale of land $   (5,000) Increase in accounts receivable $ (50,000) Decrease in inventory $   13,000 Increase in prepaid expenses $   (6,000) Decrease in interest receivable $   (7,000) Decrease in income tax payable $   (1,500) Increase in accounts payable $      5,600 $    (3,900) Net cash flow from operating activities $ 336,100

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