The Net Income reported on the income statement for the current year was $500,00
ID: 2583897 • Letter: T
Question
The Net Income reported on the income statement for the current year was $500,000. Depreciation recorded on store equipment for the year was $25,000. There was a Loss on sale of investments of $10,000 and a gain of sale of equipment of $15,000. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
End of Year Beginning of Year
Cash $97,000 $104,000
Accounts receivable 108,000 112,500
Inventory 212,000 200,000
Prepaid Expenses 15,000 12,000
Accounts payable 108,000 115,000
Wages Payable 20,000 15,000
a) Using the indirect method, prepare the cash flows from operating activities section of the statement of cash flows.
b) Would the net cash flow from operating activities be the same if the direct method had been used?
Explanation / Answer
a)
b) Net cash flow from operating activities under direct method and indirect method will be same
Cash flows from operating activities Net Income $ 500,000 Adjustment to reconcile net income to: Depreciation expense $ 25,000 Loss on sale of investments $ 10,000 Gain on sale of equipment $ (15,000) Decrease in accounts receivable $ 4,500 Increase in inventory $ (12,000) Increase in prepaid expenses $ (3,000) Decrease in accounts payable $ (7,000) Increase in wages payable $ 5,000 $ 7,500 Net cash provided by operating activities $ 507,500Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.