arsing Company\'s 2017 income statement and selected balance sheet data (for cur

Question

arsing Company's 2017 income statement and selected balance sheet data (for current assets and current PROBLEM SE iabilities) at December 31, 2016 and 2017, follow. LANSING COMPANY Income Statement For Year Ended December 31, 2017 Problem 16-1A Indirect: Computin flows from operatia $97,200 P2 LANSING COMPANY Selected Balance Sheet Accounts Sales revenue Expenses Cost of goods sold 2017 2016 $5,600 $5,800 1,980 1,540 ,400 4,600 880 700 220 160 260 280 180 31 Accounts receivable 9,000 3,800 3,600 2,800 .6,000 Rent expense Utilities expense Net income Prepaid rent Required repare the flows using the indirect method. 220 from operating activitis section only of the company's 2017 satemet c kes o Check activities, $17,780

Explanation / Answer

the following is the calculation of cash flow from operating activities using the indirect method:

note:

while working out working capital changes:

increase in current asset is reduced from operating cash flow and vice versa.

increase in current liability is added to operating cash flow and vice versa.

net income $6,000 add: depreciation expense $12,000 cash flow before working capital adjustment (6,000 + 12,000) $18,000 working capital adjustments: decrease in accounts receivable $200 less: increase in inventory (1,980 - 1,540) (440) less: decrease in accounts payable (4400-4600) (200) add: increase in salaries payable (880-700) 180 add: increase in utilities payable (220-160) 60 add: decrease in prepaid insurance (260-280) 20 less: increase in prepaid rent (220-180) (40) total working capital adjustment (220) net cash flow from operating activities ($18,000 -220) $17,780

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