Please reconcile the operating portion using the INDIRECT method. Show all work.

Question

Please reconcile the operating portion using the INDIRECT method. Show all work. Must = 7,100. Thanks

Account Balances January 1, 2013 December 31, 2013 $ 1,400 2,800 1,700 500 8,100 1,300 7,000 15,000 S 2,400 2,690 3,000 800 7,910 1,710 5,400 15,000 Cash Accounts Receivable (net) Marketable Securities (at cost Allowance for Change in Value Prepaid Items Investmens (long-term Buildings and Equipment Discount on Bonds Payable 5,400 Credits $16,000 3,800 2,400 1,100 $16,400 4,150 2,504 650 400 Accumulated Depreciation Accounts Payable Income Taxes Payablke Wages Payable Interest Payable Note Payable (long-tem) 12% Bonds Payable Deferred Taxes Payabke Convertible Preferred Stock, $100 par Common Stock, $10par Additional Paid-in Capital Unrealized Increase in Value of Marketable Securities Retained Eamings 10,000 1,196 800 9,000 14,000 8,700 500 10,000 9,800 21,500 13,700 14,100 5,400 Additional information for the year: a. Sales S39,930 (19,890 (2,100) (11,000 (1,000) (410 820 700 (200) Cost of goods sold Wages expense Other operating expenses Bond interest expense Dividend revenue Gain on sale of investments Loss on sale of equipment Income tax expense Net income 4,800

Explanation / Answer

Workings:

The discount on bonds amortized is included in the interest expense on the income statement. This being a non-cash expense, it is added back to the net income in the cash flow statement.

Cash flows from operating activities: Net income 4800 Adjustments to convert net income to a cash basis: Depreciation expense 2100 Gain on sale of investments -700 Loss on sale of equipment 200 Discount amortized on bonds payable* 10 Decrease in accounts receivable 110 Decrease in inventory 190 Increase in prepaid items -410 Increase in accounts payable 350 Increase in income taxes payable 104 Decrease in wages payable -450 Increase in interest payable 400 Increase in deferred taxes payable 396 2300 Net cash flows from operating activities $ 7100

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