ezto.mheducation.com/hm.tpx E12-6 Preparing and Evaluating a Simple Statement of

Question

ezto.mheducation.com/hm.tpx E12-6 Preparing and Evaluating a Simple Statement of Cash Flows (Indirect Method) [LC Suppose your company reports $195 of net income and $47 of cash dividends paid, and its comparative balance sheet indicates the following. Beginning Ending Cash Accounts Receivable Inventory $ 42 110 280 $242 212 172 Total $432 $626 Salaries and Wages Payable Common Stock Retained Earnings $ 17 135 280 $85 113 428 Tota $432 $626 Required: 1. Prepare the operating activities section of the statement of cash flows, using the indirect method (Amounts to be deducted should be indicated with a minus sign.) Net Income Increase-in Accounts Receivable Decrease in Inventory ncrease in Salaries and Wages Payable Dividends paid Net Cash Flow from Operating Activities ng

Explanation / Answer

1. Cash flow from the Operating Activities :

Amount $ Net Income 195 Less: Increase in Accounts Receivable 212-110 (being cash will be received in future) -102 Add: Decrease in Inventory 172-280 (being cash received in the period) +108 Add: Increase in Salaries and Wages Payable 85-17 (being cash will be paid in future) +68 Add: Dividends paid (being financing activity, not operating activity) +47 Net Cash flow from Operating Activities +316

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