Operating Activities Section Using the Indirect Method. The following income sta

Question

Operating Activities Section Using the Indirect Method. The following income statement and current sections of the balance sheet are for Polson, Inc.

Required:

Using the indirect method, prepare the operating activities section of the statement of cash flows for Polson, Inc., for the year ended December 31, 2017. Use the format presented in Figure 12.5.

How much cash was provided by (used by) operating activities? Briefly describe what this amount tells us about the company.

Polson, Ind. Income Statement for the Year Ended December 31, 2017 Sales Cost of goods sold Gross margin Selling and administrative expenses Depreciation expense Operating income Loss on sale of equipment Income before taxes Income tax expense Net income $990,000 520,000 $470,000 110,000 63,000 $297,000 (4.100) $292,900 112,900 $180,000

Explanation / Answer

Statement of Cash Flows AS ON DECEMBER 31 2017 Amount in $ Amount in $ Net income $          1,80,000 Cash flows from operating activities Adjustments for: Depreciation $             63,000 Loss on sale of Equipment $                4,100 $             67,100 (Increase) / Decrease in Account receivables $                3,000 Inventory Decrease / (Increase) $            -12,000 Prepaid expenses Decrease $                1,200 Income Tax $              -4,800 Accounts payable Increase / ( Decrese) $              -7,500 $            -20,100 Net cash from operating activities $          2,27,000

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