The indirect method please. Instructions The net income reported on the income s

ID: 2563047 • Letter: T

Question

The indirect method please. Instructions The net income reported on the income statement for the current year was $58,000. Depreciation recorded on fixed assets for the year was $24,000. In addition, equipment with an original cost of $130,000 and accumulated depreciation of $115,000 on the date of the sale, was sold for $20,000. Balances of the current asset and current liability accounts at the end and beginning of the year are listed below. End Beginning Cash Accounts receivable (net) Inventories Prepaid expenses $65,000$70,000 63,000 85,000 102,000 4,500 Accounts payable (merchandise creditors)50,00058,000 6,500 7,500 70,000 4,000 Cash dividends payable 4,500 Salaries payable 6,000 Prepare the cash fiows from operating activities section of a statement of cash flows using the

Explanation / Answer

Particulars

Amount ($)

Net Income as per Income statement

58000

Add: Depreciation

24000

Less: Gain on sale of Equipment (130000 - 115000 - 20000)

5000

Less: Increase in Accounts receivable [70000 - 63000]

7000

Add: Decrease in inventory [102000-85000]

17000

Less: Decrease in Accounts Payable [58000 - 50000]

8000

Add:Decrease in prepaid Expenses [4500 - 4000]

500

Less: Salaries Payable [7500 - 6000]

1500

Cash flows from Operating Activities

78000