Exercise 12-4 Indirect: Cash flows from operating activities LO P2 The following

Question

Exercise 12-4 Indirect: Cash flows from operating activities LO P2 The following income statement and information about changes in noncash current assets and current liabilities are reporte SONAD Income Statement For Year Ended December 31, 2017 40-35 Sales $1,739,000 852,110 886,890 Cost of goods sold Gross profit Operating expenses $238,243 41,736 46, 953 5,217 19,129 Salaries expense Depreciation expense Rent expense Amortization expenses-Patents Utilities expense 351,278 535, 612 Gain on sale of equipment Net income $ 542,563 Changes in current asset and current liability accounts for the year that relate to operations follow Accounts receivable Inventory 529,200 increase 11,325 increase Ascounts payaole Salaries payable 5 9,325 decrease 5,950 decrease Required: Prepare only the cesh flows from operating activities section of the statement of cash flows using the indirect method (Amou deducted should be indicated with a minus sign.)

Explanation / Answer

Solution :- Cash flow statement (Operating activities section)

A). Cash flow from operating activities

Net income

Add :- Depreciation expense

Add :- Amortization expense (patent)

Less :- Gain on sale of equipment

542568

41736

5217

6956

Operating profit before the working capital changes

Less :- Increase in accounts receivable

Less :- Increase in inventory

Less :- Decrease in accounts payable

Less :- Decrease in salaries payable

582565

  29200

  11325

  9325

  5950

Conclusion :- Cash flow from the operating activities = $ 526765.

Particulars Amount ($)

A). Cash flow from operating activities

Net income

Add :- Depreciation expense

Add :- Amortization expense (patent)

Less :- Gain on sale of equipment

542568

41736

5217

6956

Operating profit before the working capital changes

Less :- Increase in accounts receivable

Less :- Increase in inventory

Less :- Decrease in accounts payable

Less :- Decrease in salaries payable

582565

  29200

  11325

  9325

  5950

Cash flow from operating activities 526765

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