Exercise 12-3 Pharoah Company reported net income of $184,850 for 2017. Pharoah

Question

Exercise 12-3

Pharoah Company reported net income of $184,850 for 2017. Pharoah Company also reported depreciation expense of $33,700 and a loss of $4,690 on the disposal of plant assets. The comparative balance sheets show an increase in accounts receivable of $15,150 for the year, a $15,640 increase in accounts payable, and a $4,030 increase in prepaid expenses.

Prepare the operating activities section of the statement of cash flows for 2017. Use the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Adjustments to reconcile net income to

Pharoah Company
Partial Statement of Cash Flows

December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017

Cash at Beginning of PeriodCash at End of PeriodCash Flows from Financing ActivitiesCash Flows from Investing ActivitiesCash Flows from Operating ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Provided by Operating ActivitiesNet Cash used by Financing ActivitiesNet Cash used by Investing ActivitiesNet Cash used by Operating ActivitiesNet Decrease in CashNet Increase in Cash

    Decrease in Accounts Payable    Decrease in Accounts Receivable    Decrease in Prepaid Expenses    Depreciation Expense    Gain on Disposal of Plant Assets    Increase in Accounts Payable    Increase in Accounts Receivable    Increase in Prepaid Expenses    Loss on Disposal of Plant Assets    Net Income    

$

Adjustments to reconcile net income to

Cash at Beginning of PeriodCash at End of PeriodCash Flows from Financing ActivitiesCash Flows from Investing ActivitiesCash Flows from Operating ActivitiesNet Cash Provided by Financing ActivitiesNet Cash Provided by Investing ActivitiesNet Cash Provided by Operating ActivitiesNet Cash used by Financing ActivitiesNet Cash used by Investing ActivitiesNet Cash used by Operating ActivitiesNet Decrease in CashNet Increase in Cash

    Decrease in Accounts Payable    Decrease in Accounts Receivable    Decrease in Prepaid Expenses    Depreciation Expense    Gain on Disposal of Plant Assets    Increase in Accounts Payable    Increase in Accounts Receivable    Increase in Prepaid Expenses    Loss on Disposal of Plant Assets    Net Income    

$

    Decrease in Accounts Payable    Decrease in Accounts Receivable    Decrease in Prepaid Expenses    Depreciation Expense    Gain on Disposal of Plant Assets    Increase in Accounts Payable    Increase in Accounts Receivable    Increase in Prepaid Expenses    Loss on Disposal of Plant Assets    Net Income    

    Decrease in Accounts Payable    Decrease in Accounts Receivable    Decrease in Prepaid Expenses    Depreciation Expense    Gain on Disposal of Plant Assets    Increase in Accounts Payable    Increase in Accounts Receivable    Increase in Prepaid Expenses    Loss on Disposal of Plant Assets    Net Income    

    Decrease in Accounts Payable    Decrease in Accounts Receivable    Decrease in Prepaid Expenses    Depreciation Expense    Gain on Disposal of Plant Assets    Increase in Accounts Payable    Increase in Accounts Receivable    Increase in Prepaid Expenses    Loss on Disposal of Plant Assets    Net Income    

    Decrease in Accounts Payable    Decrease in Accounts Receivable    Decrease in Prepaid Expenses    Depreciation Expense    Gain on Disposal of Plant Assets    Increase in Accounts Payable    Increase in Accounts Receivable    Increase in Prepaid Expenses    Loss on Disposal of Plant Assets    Net Income    

    Cash at Beginning of Period    Cash at End of Period    Cash Flows from Financing Activities    Cash Flows from Investing Activities    Cash Flows from Operating Activities    Net Cash Provided by Financing Activities    Net Cash Provided by Investing Activities    Net Cash Provided by Operating Activities    Net Cash used by Financing Activities    Net Cash used by Investing Activities    Net Cash used by Operating Activities    Net Decrease in Cash    Net Increase in Cash    

$

Explanation / Answer

Prepare the operating activities section of the statement of cash flows for 2017. Use the indirect method

Net income 184850 Adjustment to reconcile net income Depreciation expense 33700 Loss on disposal of plant assets 4690 Changes in current assets and liabilities increase in accounts receivable (15150) increase in accounts payable 15640 increase in prepaid expenses (4030) Net cash flow from operating activities 219700

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