Exercise 23-5 Cheyenne Company\'s income statement for the year ended December 3

Question

Exercise 23-5 Cheyenne Company's income statement for the year ended December 31, 2017, contained the following condensed information. $836,000 Service revenue Operating expenses (excluding depreciation) Depreciation expense Loss on sale of equipment Income before income taxes Income tax expense Net income $626,000 60,000 26,000 712,000 124,000 40,000 $84,000 Cheyenne's balance sheet contained the following comparative data at December 31. 2017 2016 Accounts receivable Accounts payable Income taxes payable $38,000 41,000 4,100 $53,000 30,000 8,400 (Accounts payable pertains to operating expenses.) Prepare the operating activities section of the statement of cash flows using the direct method. CHEYENNE COMPANY Statement of Cash Flows (Partial) For the Year Ended December 31, 2017 Cash Flows from Operating Activities

Explanation / Answer

Cash flow from operating activity:-

Income before taxes. 124000

Adjustment:- depreciation. 60000

Less:- loss on sale of equipment. (26000)

Income before working capital change. 38000

Add:- Increase in account receivable. 15000

Decrease in account payable. 11000

Cash flow from operating activity. 64000

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